Strategic Defaults

Walking Away From Your House

Strategic default is the new concept in how homeowners are dealing with mortgages on homes that are underwater.  A strategic default is simply when you stop paying your mortgages.  Many homeowners are considering strategic defaults on their mortgages.  It is estimated that over eleven million homes are now underwater in America.  More than three and a half million homeowners are behind in their mortgage payments.  There are already a million and a half homes currently in the foreclosure process.

The New York Federal Reserve estimates that there are an additional 3.6 million foreclosures that will be taking place in the next few years.  Does it make sense to keep paying a mortgage on a home where it will be many years before the home regains its former value?  A columnist named James Surowiecki recently wrote in the New Yorker Magazine that paying mortgage payments for a home that is underwater is “setting a pile of money on fire every month”.

Mortgage Payments: A Moral Quandary?

For some families there is a moral quandary in making the decision to stop making mortgage payments on a home that is underwater.  Should families be embarrassed or feel they are going to lose respect as they break their mortgage contract obligations and stop paying their mortgage?  Companies utilize the bankruptcy process to default on their financial obligations when they feel it is appropriate.  So why shouldn’t individuals consider it is a business decision as to whether they should pay their mortgage payments when their home is underwater and it is unlikely it will ever get back to its former value at anytime in the near future?

Penalties For Not Paying Your Mortgage

Obviously the first penalty is that your home will eventually go into foreclosure.  However the foreclosure process in the State of New York, as in most other states, is a slow process.  This means you won’t be forced to leave your home in the short run.

The second issue involves your credit score.  Not making mortgage payments will definitely have a negative impact on your credit score.  It is estimated that your credit score will go down a minimum of 85 to 100 points if you default on making mortgage payments.

Strategic default is not something to be taken lightly.  It should be considered as a last option.  Your first option should be to make a mortgage modification.  Mortgage modifications allow you to rework your mortgage to more favorable terms.

If you decide to strategically default you should save the funds that had formally been allocated to make mortgage payments.  This will give you the ability to retain an attorney to fight the foreclosure in court.  It will also give you money for a down payment on an apartment that you may need to rent down the line.

Tax Implications of Strategic Defaults

If a portion of your debt is forgiven by a financial institution the forgiven amount is considered taxable income by the Internal Revenue Service.  You may end up receiving a 1099 from your bank that you will have to declare on your income taxes.  You should talk to a tax professional with regard to how to handle this tax issue.

Strategic defaults are not for everybody but more and more people are making this choice!

Foreclosure Lawyers

If your house is in foreclosures we can help you.  The Law Offices of Schlissel DeCorpo have been helping New Yorkers stay in their homes.  To start with we can help you with the mortgage modifications.  We are familiar with the problems mortgage modification programs have.  We can also assist you with a forensic audit with regard to your mortgage.  Should you be served with a summons and complaint we will appear in court for you and attend settlement foreclosure conferences.  During these conferences we will press the financial institutions to cooperate in giving you a mortgage modification.  We will submit answers to the formal compliant submitted by the banks.  Our answers will allege defenses such as defective mortgagesdefective foreclosure law suitspredatory lendingforeclosure fraud and other real estate related defenses.

We will advise you with regard to all of your foreclosure options.  One of your options may be a foreclosure related bankruptcy.  There are two types of bankruptcies that can be utilized in foreclosure. A Chapter 7bankruptcy and a Chapter 13 bankruptcy.  There are benefits and drawbacks to each of these bankruptcies.  When you file bankruptcy it immediately stops creditor harassment.  All debt collection activity has to come to an end when a creditor receives notice of a bankruptcy filing.  Foreclosure proceedings also are immediately frozen upon the filing of a bankruptcy.  At the end of the bankruptcy process you receive adischarge of your debts.  We educate our clients with regard to reestablishing credit and the end of the bankruptcy.  There are many bankruptcy myths such as you will never receive credit again that are simply untrue.  At your initial free consultation with our office will we describe the bankruptcy process.  We will explain to you what bankruptcy exemptions are and why it may be necessary to file bankruptcy.  Feel free to call us for a free consultation 1-800-344-6431, 516-561-6645 and 718-350-2808.

Rehabilitating Your Credit Score

creditMany Americans have fallen on hard times in the past few years. Loss of a job, being downsized, inability to make credit card and mortgage
payments and defaulting on personal loans have had negative effect on the credit standing of many Americans.

Credit scores generally run from 300 to 850. There are three major credit bureaus in the United States. They are Equifax, Experian and Transunion. Each of these credit bureaus have their own way of calculating credit scores. The following are a list of ways to help increase your credit scoring:

1. Consider adding a letter to your credit report explaining a
hardship that caused you to miss credit card payments. All three
credit bureaus allow consumers to add brief statements to their credit
reports.

2. Bring your credit card payments up to date. Bringing your credit
card payments up to date will have the most significant affirmative
impact on your credit score.

3. Obtain Secured Credit Cards
Secured credit cards can be used to rehabilitate your credit score. These cards require you to put a certain amount of money in a bank account, for
example, $500. This is used as collateral against the amount of
credit you receive on your card.

4. Join a Credit Union
Credit Unions are more lenient than other financial institutions in
offering credit cards and personal loans to their members.

5. Avoid Credit Card Repair Companies
Most credit card repair offers are scams. The claims made by these
companies are that they can straighten out your credit. They have no magic wand! Although there are some legitimate credit card repair companies, you don’t need to hire them. Just pay your bills on time and your credit
will over time repair itself.

Foreclosure Lawyer

Our law office provides foreclosure defense for our clients. We help
our clients with mortgage modifications and mortgage modification
programs that don’t work
. We litigate defective mortgages, defective
foreclosure lawsuits
, predatory lending, bad faith on behalf of
financial institutions
and other real estate related matters. We
attend foreclosure court conferences for our clients and we utilize
these conferences to try to motivate the lenders to give our clients
mortgage modifications. We educate our clients as to the foreclosure
options
available to them. In appropriate situations, we file
foreclosure related bankruptcies. These bankruptcies can be either a
Chapter 7 or Chapter 13 bankruptcy. These bankruptcies automatically
stop foreclosures from moving forward. In some circumstances,
bankruptcy can help eliminate second mortgages. Feel free to call us
for a free consultation. Thank you for reading my foreclosure blog.

Foreclosure Defense in Valley Stream, Lynbrook, Baldwin, Malverne, Freeport, Oceanside, Long Beach, Elmont, Lakeview, West Hempstead, Hempstead, Merrick and Bellmore, New York

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We represent individuals throughout the New York Metropolitan area with divorce and child custody, personal injury, car accident, wrongful death, estate administration, nursing home and medicaid issues

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