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Saw three couples this month who needed to file bankruptcy, because they were getting sued–garnished in one case–by the second mortgage after a short sale.
It was surprising that they were surprised.   At the peak of the crisis, for or five years ago, second mortgages would take what they could get at a short sale and let the rest of it go.  But they don’t often do that anymore.  (At least not without intense negotiation.  I’ve seen it once in the last year.)
And usually they make you sign that you KNOW that you still owe the money.  So, where’s the surprise?
Sadly, some real estate agents are less than candid about what to expect from the second mortgage.   Here’s a link to a guy who calls himself Virginia Short Sale Advice.    A lot of what he says here is really good.   Including why a short sale is better for your credit than a foreclosure.
But he says it’s a “myth” that “you could be sued after the close of a short sale for the deficiency.”  He explains that in “many states” you can’t get sued.  That’s true in many states, but he’s writing to people here in Virginia!  Here you can.  (Bloomberg says they can sue in 39 states.) So the “myth” is actually the truth.  And his Virginia Short Sale Advice is, well …..you can figure it out.
What’s my advice?  Well, at least if you hang tough, you can sometimes get the second mortgage to agree to forgive the debt.  But you will be under intense pressure from all the other parties to the deal, the first mortgage, the buyer, and “your” real estate agent, to cave in.  You need to tell your agent up front you will not do a short sale if the second mortgage won’t waive the deficiency.

Tell your agent, up front, you will NOT do a short sale that leaves you owing that second mortgage.

If you can’t afford to pay that second mortgage now, you won’t be able to pay it afterwards, either.    So you will end up talking to a bankruptcy lawyer, eventually.  Talk to a lawyer now.
If you at least talk to a bankruptcy lawyer, your bargaining position on the short sale is much improved.  Negotiations are won by people who can walk away form the table.
When you get pushed by everyone who wants the short sale to go through, you can push back.  ”I’ve talked to a bankruptcy lawyer–and if we can’t do a short sale on my terms–no second mortgage deficiency–I’m ready to file bankruptcy instead.”
Is there any reason to actually file bankruptcy BEFORE the shortsale, rather than wait and see what they do safterward?  Yes, a big one.
You can easily lose your eligibility to file bankruptcy Chapter 7 if you wait until after the shortsale.  Why is that?  Your eligiblity depends on the “means test” of what you can afford to pay.  If you own real estate, they figure what you can afford, based on what your mortgage payments actually are–and yours are high of course, or you wouldn’t be trying to short sale this house.  When you are a renter, you get the rental allowance, regardless of what your actual rent is.  And they figure your ability to pay based on that.
When you own the house, that second mortgage payment is one of the things you are allowed to count, to show why you need to file bankruptcy.  But once the short sale has gone through, you can’t count it anymore.  Now that second mortgage is just one of the debts you have to pay, because the “means test” budget using the rent allowance shows you have plenty of money left over.
That’s what happened to one of the three couples I saw this month.  Have to pay that left over seconed mortgage–more than fifty thousand dollars, that they could have easily gotten rid of filing bankruptcy first, and then doing the shortsale.
So, did they protect their “good credit” with the short sale?  Nope, the “settled” notation on the first mortgage helped them–but the past due, judgment, garnishment on the second sure didn’t.
If you can’t afford that second mortgage while you are living in the house, don’t expect you can afford it after you move out.  And if you can’t pay all your bills on time…it’s time to talk to a bankruptcy lawyer.
 

Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for April 30, 2013 Kelly Rutherford Faces Bankruptcy During Expensive Custody Battle Kodak Spinoffs Clear the Path for Emergence From Bankruptcy Supreme Court won’t hear Charter Communications bankruptcy case

Eighty percent of success is showing up, according to Woody Allen. So, too, in matter concerning debt collection lawsuits.
You owe a debt to a credit card company. You fall behind, and the credit card company sells the debt to some other company.
Happens all the time, don’t look so shocked.
The company buys the debt for something on the order of 25% of the outstanding debt. In exchange for the right to collect, they get a computer file with your name and other information.
What the debt buyer does not get is a copy of the application, old statements, or charge slips. In other words, no proof that is admissible in a court of law.
Debt Buyers File Thousands Of Lawsuits
Debt buyers are in business to collect overdue bills, and they pay millions of dollars each year for the ability to do so.
When people don’t pay voluntarily, the debt buyer sues. And because there are a lot of accounts out there, the big players file lots of lawsuits.
In fact, last week I was in Chatsworth (which is where the Los Angeles collection lawsuits are heard) I stood next to a process server who was filing a stack of lawsuits about 12 inches high. Conservatively, that’s about 250 collection lawsuits.
For a single day. And a single debt buyer.
Remember, They Don’t Have The Goods
It doesn’t take much for someone to sue you for money – just a check for a filing fee an a few pieces of paper. Legally you’ve got to have a good faith belief in your ability to win the case, but there’s nothing saying that you’ve got to have lock solid proof in order to walk into court.
That’s the problem – the debt buyers don’t have proof.
They have no proof of the amount due.
They have no proof of whether the numbers are correct.
They have no proof that the debt they bought is yours.
They have no proof. Period.
Don’t Let Them Roll Over You
If you’re sued for a debt, you need to show up – just like Woody says.
Get a lawyer, or do it on your own. File an Answer, and do it on time. Make the debt buyer prove the case.
But don’t ignore the lawsuit. Because if you do, there’s a 100% chance that you will lose.
Image credit:  Luiz Fernando / Sonia Maria
Why You Should Remember Woody Allen If You’re Sued For A Debt was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.

In the state of Washington, your Chapter 13 Plan Payment may be largely dictated by how you fare on the Means Test. In simplest form, the completion of the Means Test calculation determines how much you can afford to pay back to your unsecured creditors. This number is derived by taking a six month total of your gross income and then subtracting a series of both real and IRS approved deductions. One of the major IRS approved deductions is the “Car Ownership Allowance.”
The problem is you don’t get the Car Ownership Allowance deduction without a car payment. So if we take two bankruptcy filers and one has a car payment and the other doesn’t, they might each ultimately have the same payment for the same period of time, but one of them is going to pay off a car during that time period and the other one is going to pay more money to her credit cards.
This is not to say that you should immediately head out to the car lot to buy a car prior to filing. You should always consult with your attorney before making this purchase because there are additional factors that determine whether purchasing a car will have any significance on the amount that you will have to pay back in your Chapter 13.
At the same time, if you are driving a beater now and you see yourself needing a car within the next two years or so, buying the car prior to filing is probably going to be a much smoother and cheaper process than waiting until after the case has been filed.
Again, the key is checking in with your attorney prior to heading out to the car lot. Please feel free to give me a call anytime at either 206-674-4559 or 503-860-6868 if you have any questions at all, thanks.
The original post is titled Buying a Car Before Filing a Chapter 13 Bankruptcy in Washington , and it came from Oregon Bankruptcy Lawyer | Portland, Salem, and Vancouver, Wa .