Short Sale vs. Foreclosure

A lot of our clients aren't sure what the effects of losing their real property are. There are several schools of thought. I will only (attempt) to address the differences as they pertain to bankruptcy.

Warning: gross generalization and simplification ahead

If you choose to short sale your house it would look like this. First you would list your home with a qualified agent. This agent would get the banks permission to do a short sale. They would then gather several (hopefully) offers and submit them to the bank. The highest one wins and the bank would approve. What it means for you is that you would stay in your home until ownership transfered to the party that bought it. They may even work out a way that you could rent it back for a period of time giving you enough time to get moved --it's up to the new owner though.

Once it's not in your name any more then the messy part begins. First, they say that a short sale looks better on your credit. This makes no real difference though if you are going to have to file bankruptcy to keep away from the down side of the short sale. This downside comes in the form of a 1099. You see, as far as the Government is concerned, when one party recognizes a loss (your old mortgagee) then someone else must recognize a gain (sadly, this is you). You realized no actual financial gain in the short sale. The only people who made any money in the short sale was the agent who helped you with the short sale, escrow and title maybe too. BUT what you did gain is the "forgiveness" of a chunk of money. Well, you have to pay taxes on that money. You will get a 1099 and be required to pay taxes on that amount. It's ugly. (Check with you CPA to get the hard facts on this subject.) That is when you may want to consider filing a bankruptcy to prove your insolvent and unable to pay that debt. A bankruptcy stays on your credit report for up to 10 years, so it is important to rebuild as soon as you are able to.

Okay, now there is foreclosure. No, this does not look good on your credit report. But if your credit is already not great (and if you are at the point of foreclosure trust me that it does not look great) then an easy way to walk away from the property would be to file a bankruptcy and walk away clean. This really is the easies solution to not being attached to your property any longer. There are no 1099's a, minimal mess and no deficiencies. Wait, I take that back, you would be responsible for any HOA dues that accumulate between the date of filing and the date of foreclosure when the property goes into the banks name and our of yours --the only deficiency. As for credit, the foreclosure will be on there as well as the bankruptcy. Again, the bankruptcy is on there for up to 10 years.

Obviously, neither of these options are ideal. The best plan of action is to educate yourself. Speak to a licensed Broker for information on short sale and also to a bankruptcy attorney for that side of the information. It NEVER hurts to be really educated when making a decision.

For any further info (or for more details and/or information for you specifically) please call or stop in today.
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The Chang & Diamond Team!

Allow me to introduce "The Team" here at Chang & Diamond, APC.

Starting with our Partners Richard Chang & Steven Diamond. They started Chang & Diamond, APC in 1998 and have been mastering bankruptcy ever since. In 2008 we were joined by Associate Alison Maloof. She graduated and passed the bar in 2007 and has been involved with consumer debt for her entire career! When you come in for your free consultation you most likely meet with one of these 3 Attorneys. They are also available every day by phone if you happened to call in.

We offer Saturday appointments at some of our offices and if you schedule your free consultation on Saturday you may end up meeting with Tony or Jason. Tony finished Law School and was practicing law in Tennessee. He is studying to take the CA bar now. He has a wealth of knowledge and always directs our clients to the best route for them. Jason is a Paralegal here at Chang & Diamond, APC. He has been with us for just over a year and picked up the Bankruptcy law very quickly. He assists in training new Case Assistants and is always on the lookout for ways to help our clients.

Briana is the manager of the office. She has been with Chang & Diamond since 2007. Her focus was, is and always will be on creating a respectful and fulfilling business atmosphere where customer service is King! (Check out some of our testimonials for proof!)

Next, we have the two ladies that file all of our cases electronically. Melody and Donna spend hours every day filing cases, amendments, oppositions, motions, notices etc. They have their hands full, but manage all cases flawlessly.

Sitting up front we have Carla. She greets every client with a smile. She is very knowledgeable and is a great help to every client that walks through our door.

Moving along to the "Bee Hive" we have Liz, Judi, Jason, Marisol & Scott. We call it the Bee Hive because each of them is working toward a common goal. Each of these members of our team help with the most difficult part of the entire bankruptcy process --collecting and organizing the documentation and creating the file to be reviewed by the Attorney. Each of them has wonderful people skills and fantastic attention to detail.

Finally we have Piper, the office mascot. She is Alison's Shnoodle who joins us at the office a couple days every week. She may let us all know that you have joined us with a bark, but be assured that she is really just a 14 pound ball of love.

We really hope you have a chance to come in and meet one or two of us! See you soon.

Chapter 7 Basics

The basics of Bankruptcy are very simple, though the preparation and filing can be quite difficult. Let's discuss Chapter 7.

Chapter 7: There is a plethora of information on Chapter 7 bankruptcies online. But here is the short and sweet breakdown. Chapter 7 is the complete elimination of ALL of your credit cards, medical bills & personal loans. All of it. Wiped away. Gone. You can file for Chapter 7 IF you make under the Median Family Income set by the Government based on the census that we all just finished filling out.

While this seems very black and white, there are exceptions. That is why it is important to take advantage of a free consultation at one of our five offices around San Diego and Riverside County. Even if you don't know if bankruptcy is right for you, you can never be too informed. A free consultation means you have nothing to lose and information to gain. Come see us today!

Contact us today to get more information on Chapter 7 bankruptcy and schedule your free consultation with one of our local and trustworthy attorneys.

Discharge Student Loans?

Word is that Senator Richard Durbin, a Democrat from Illinois has been pushing to change the Bankruptcy Laws so that student loans are discharged.

Here is the exact wording from his website:

"The Durbin bill restores the bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005, so that privately issued student loans will once again be dischargeable in bankruptcy, placing student loan companies in the same position as virtually all other private creditors. The bill also clarifies that existing protections are specific to loans that were issued by or are guaranteed by state or federal governments."

We take several calls every day wondering if they can discharge their student loans. Time will tell if Sen. Durbin and his team are successful.

There are certain debts that are discharged in Bank and certain ones that are not. Call or stop by Chang & Diamond today to discuss if bankruptcy is the right step for you.