Straight Talking on The Law

Mortgage Forgiveness Tax Treatment

By: Robert Harris, Attorney at Law, Harris Law Firm, Hillsboro, Oregon

People considering a short sale or a deed in lieu of foreclosure or a strategic default need to consider how the IRS will treat the debt that is forgiven. Because the IRS typically treates debt that is forgiven as "income" A short sale particularly can result in the mortgage company sending the homeowner a 1099 form stating that the homeowner received "income". However, due to mortgage crisis, the federal government has passed legislative relief for most homeowners.

There is a great blog article from Hertsel Shadian, Attorney at Law, LLC, we found that succinctly sets out the tax issues encountered by all the homeowners that are considering a short sale, deed in lieu or strategic defaulting on their home.

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts you should know about Mortgage Debt Forgiveness.

Mortgage Relief Scams

By: Robert Harris,

Attorney Harris Law Firm

For people who are upside down in their homes, and are desparately looking for a way out, rest assured that scammers are more than willling to take yor money. A Huffington Post article about mortgage relief scams explains one type of common scam. 

Before you ever, ever, ever agree to hand your money over to any mortgage relief, or debt workout, or distressed loan "specialist" (who may actually be nothing more than a boiler room operator somewhere in Florida), talk to a local reputable attorney about your legal options. For a relatively small fee, an experienced attorney can assess your situation and spell out your options.

One thing to be aware of. There are a very few number of attorneys who, usually unkowningly, work with these worthless loan modification companies. These companies persuaded some naive attorneys to act as their "fronts". So the attorney is convinced that all they had to do was attract and sign the distressed clients,  collect the fee, and the loan modifaction staff will take care of the client. So if you do retain an attorney, just make sure they are handling all of the work within their own office.

"It's Money, and I Want it NOW!"

 

 

By: Robert Harris

You've seen the commercial. You know, the companies that just want to help you. In reality, these lenders are buying personal injury awards. Sometimes they buy the stream of payments you've negotiated, and sometimes, more alarmingly, before you've even received an award.

Before you even think about selling your award, read this article from the NY Times.

These companies may serve a need, just as title loan companies and payday lenders. But if you have a personal injury settlement, whether its simple dog bite, an auto accident or a wrongful death, you need to talk to an experienced attorney about the value of your case and the risks of doing business with these lenders.

Most personal injury lawyers in Oregon will offer a free consultation. So take advantage of it.

Call us at 503-648-4777, or email us for a free consultation on your case. Or, for more information about how we can help you, go to our website.

Strategic Mortgage Default

   By: Robert Harris

With the local housing market still in a downward mode, more homeowners are calling me about strategic defaults on their home loan. A strategic default is where the borrower has the ability to pay the loan but decides not to because the home is worth less than the amount of the loan.

Businesses have engaged in strategic defaults forever. If a business can't pay its debts. It closes its doors, or tells its bank that it must reduce the loan, or they will walk.

For homeowners however, strategic default is a new option. Since home prices seemed to have historically either risen consistently, or at least stayed constant, there was little need for considering the a strategic default. However, with home prices having dived by 20% - 35%, there are a lot of homes that are worth much less than is owed on them. 

It's been estimated that as many as 20% of the current defaults on home loans are strategic defaults. And, studies show that when the home value sinks to 75% of the amount owed, people are more likely than not willing to consider a strategic default.

The federal government has very recently enacted a new program that appears to be directed right at people who are considering a strategic default. This program is as much, or more, to benefit creditors as it is homeowners, since the last thing a lender wants is a foreclosed home. Because if an owner does quit making payments, they can continue to live in the home until the foreclosure is complete, which can be as long as one year, and make no payments.

Before you consider a strategic default, you need to consider the benefits and the detriments. Yes, you can live "payment free" in your home during the foreclosure. Yes you can substantially reduce your overall debt. But a foreclosure will harm your credit score.

However, for someone who is $100,000 underwater in their home, it could be a good business decision to consider a strategic default. Many people would be willing to take a hit on their credit score if they could save $100,000.

Cashing out Retirement to Pay Debts? - Good Idea?

  By: Ryan Hackett

Bankruptcy is a last resort for most people. As a bankruptcy attorney I have met several debtors who have tried almost everything to pay off their debts before they realize they need help.  One of the most unfortunate circumstances that I come across is people who have cashed-out or borrowed large sums against their retirement accounts in an attempt to pay off their creditors. Many times, they aren’t able to get enough funds to pay off everyone and still end up in bankruptcy. Even if you have enough in your retirement accounts to pay off your creditors, it could be disastrous to cash-out retirement funds to do so.  Nearly all retirement funds are protected from creditors. The most common forms of retirement funds that I see are held in 401(k)’s, IRA’s, PERS and 403(b) accounts.  All of these accounts are safe from creditors if you file bankruptcy. 

Short Sales Information

By: Robert Harris

I Had coffee with an experienced realtor last week. (At my favorite coffee bar Insomnia Coffee in Hillsboro Oregon) We talked about the housing market (pretty good for homes under $275,000, but not so good for those more luxurious homes), foreclosures and short sales.

After our meeting he gave me what I think is some concise, valuable literature on short sales and foreclosures. If you're a homeowner, and in a situation where a short sale or foreclosure appears to be an option, you'll want to read these.

And, if you're looking to buy a short sale property, this information will educate you to the process and the hurdles that you may face.

Who is filing for Bankrutpcy?

 

By: Ryan Hacket,

      Attorney at Hackett and Harris, LLC.

What types of people file for Bankruptcy?

In 2008 over 1 Million Americans filed for bankruptcy protection.  I recently came across this interesting and colorful chart that broke down the demographics of these filers.

As you can see from the chart there is a broad spectrum of people who file bankruptcy.  When I tell my friends and family members that I am a bankruptcy attorney they always seem to assume that I help people who have nothing and are unemployed.  I always tell them that quite the opposite is true. Nearly all of my clients have jobs and many have assets, such as cars, homes, or other valuable items.  As the chart shows, only 13% of people who filed bankruptcy in 2008 were unemployed.

Debt Settlement Companies or Bankruptcy

By: Robert J. Harris

On today's MSN Money website, there is a great article called "10 Secrets of Filing for Bankruptcy". All the tips are valuable, but because this is a BLOG, and I know people reading this may have come here looking for bankruptcy alternatives, I want to focus on tip number 5.

                             "Debt Settlement Companies May do More Harm than Good"

Debt settlement firms offer to play hardball with creditors and whittle outstanding balances by as much as 75%. They bill their services as an alternative to bankruptcy, but in many cases they can hurt more than they help. Debt settlement firms are unregulated, for-profit entities that require regular payments before taking any action on a consumer's behalf. This business model works squarely against debtors' interests, says Walter Benenati, a bankruptcy attorney in Orlando who worked briefly for a debt settlement firm. "They're getting fees every month, so they have no incentive to settle (with creditors) as fast as possible," he says.

In fact, you don't need a middleman to negotiate with creditors. But, says Mariana Bekker, director of media relations for the United States Organizations for Bankruptcy Alternatives, a debt settlement trade organization, most debtors don't have the "time, stamina or desire" to do it themselves. Either way, you'll owe taxes on any amount saved on your debt. (That's right: The IRS considers forgiven debt taxable income.)

About a year ago, I had a representative of a "debt settlement company" call me and asked me to refer people to him. He told me if I did, he'd refer all his clients to me. He said that none of them ever complete their payment plans anyway, so I'd get a lot of work. Needless to say, I didn't do business with that gentleman.

Good, Accurate Bankrutpcy Information on the Internet? Good Luck

By: Robert Harris

As someone who spends a significant amount of time writing on legal issues, it is quite concerning to see so much incorrect and erroneous information about Oregon bankruptcy law on the Internet.  Consumers need to be aware of this.

 

I frequently do Internet searches on various bankruptcy topics and I am constantly amazed and disappointed at the extremely poor quality of the information on some websites. 

There are three main reasons why some online bankruptcy information is bad

 

Oregon Foreclosure Help for Financially Challenged Homeowners

By Utilizing the U.S. Dept. Of Treasury’s new ‘Making Home Affordable Plan, Homeowners May Be Able to Prevent or Stop Foreclosure on a Home Mortgage Through Loan Modification or Oregon Refinance.

 By: Grant Yoakum

       Harris Law Firm, PC

       Hillsboro, Oregon

For months, the mainstream media has presented troubling information with respect to national housing prices. Understandably, many have remained skeptical. Evaluating the scope and depth of the present housing crisis is difficult – especially with the wide and diverse geography of our nation. Finally, accurate data is emerging and so the first steps to assessing and repairing the damage can begin. 

On March 19, 2009, witnesses testifying before the U.S. House of Representatives, Financial Services Committee, stated that approximately 8.3 million families were ‘at risk’ of mortgage foreclosure. Those estimates appear reliable.  Translated into rough percentages, perhaps 12% of U.S. homes bearing mortgage loans are touched in this way.  It is now hard to imagine that any person remains untouched by the economic recession that first poked an ugly snout into the news in December 2007.