Foreclosure and Repossession
As is the case nationwide, the rate of home foreclosures and repossessions of personal property in Denver and most areas of Colorado has skyrocketed in the past few years due to the weakened economy. Foreclosures in particular have driven many into bankruptcy, even for those who have no other debt, such as credit card debt, medical bills or taxes owed.
An experienced Denver foreclosure defense lawyer, David M. Serafin will aggressively fight against overreaching lenders which prematurely attempt to foreclose or repossess property in violation of the Bankruptcy Code and/or the Fair Debt Collection Practices Act (FDCPA).
Many bankruptcy debtors are upside down (e.g. the debt owed exceeds the fair market value) on their homes and are also behind on regular monthly mortgage payments.
Even for those who prefer to keep their Colorado home, surrendering the home is the best option particularly for those who are significantly upside down and who are several months behind on payments. For instance, a to-be-debtor who is upside down by over $50,000 and is over a year behind on monthly payments of $2,000 or more would be hard pressed to confirm a chapter 13 plan in Colorado Bankruptcy Court and, even if the plan is confirmed and overcomes feasibility issues, the debtor may be put in a situation where the monthly plan payments are too high and, accordingly, the plan likely fails.
Surrendering the house (or a vehicle) in a Colorado chapter 7 or chapter 13 allows the debtor to discharge the deficiency just like with any other unsecured debt, such as credit card debt or medical bills. (If the debtor qualifies – typically by passing the Means Test – a chapter 7 in Colorado will discharge 100% of the deficiency whereby, depending upon other factors such as income and amount/type of secured and unsecured debt, a chapter 13 will discharge anywhere from 0% to 100% of such debt.)
Conversely, for those not upside down (or not as far upside down) and who have enough earned income to pay back or “cure” back the mortgage arrears over time, it may make sense to fight to keep the family home. A chapter 13 filing can stave off an imminent foreclosure sale and, assuming the plan is confirmable, the debtor can cure mortgage arrears over a 3 to 5 year time period while making regular monthly mortgage payments back to the lender. (Even though the lender will likely file a Motion for Relief from Stay in Colorado Bankruptcy Court to protect its security interest, particularly if no equity exists or the debtor is behind on monthly payments, it will rarely continue to pursue foreclosure if the debtor is capable of curing the arrears.)
Many homeowners in Colorado have two mortgages and the home has precipitously dropped in value such that the home is upside down with respect to the first mortgage alone. Section 506 of the Bankruptcy Code allows a homeowner to “strip off” a second mortgage lien in chapter 13 when the first mortgage exceeds the home’s fair market value. Properly applied, Section 506 renders the second mortgage lien as unsecured, similar to credit card debt or medical bills, if the bankruptcy debtor successfully completes the plan. Taking the aforementioned principles into consideration, many chapter 13 plans allow a debtor to cure mortgage arrears for the first mortgage while simultaneously stripping off the second mortgage over a 3 to 5 year plan.
Similarly, the Law Office of David M. Serafin will fight to help you keep your motor vehicle while accomplishing the goals of bankruptcy. Arrears owed for a vehicle loan can also be cured in a chapter 13 plan. Further, for debtors with a vehicle purchased at least 2.5 years ago or with personal property purchased at least 1 year ago, Section 506 (and accompanying case law) allows a debtor in chapter 13 to “cram down” the loan balance down to the vehicle’s fair market value for upside down vehicles. This provision further allows for a debtor to pay a greatly reduced interest rate (5% or less) and stretch out the vehicle payments up to 60 months – without paying additional interest.
The Law Office of David M. Serafin will advise you of your rights when dealing with mortgage and motor vehicle lenders both within and outside the bankruptcy context. An experienced Denver bankruptcy lawyer who defends against unfair debt collection, David M. Serafin will fight to ensure that you keep your home or vehicle and that your creditors strictly abide by the laws governing foreclosures and repossessions. Further, the Law Office of David M. Serafin will provide you with the most cost effective solution for when these debts seem to grow out of control.