Bankruptcy and Foreclosure Avoidance

One of our members gave a great presentation on education about bankruptcy and foreclosure. In order to prevent something, you need to understand the cause and purpose behind it. The presentation that Micah gave was informative as well as very eye-opening. Below are the notes taken from the presentation.

Bankruptcy and Foreclosure Avoidance: 4/12/08

Real Estate Seminar at Georgia Tech
Lender Presented the following information:

• Buying Real Estate can be used as an investment tool
• Real Estate in Georgia appreciates on average 6.2% per year

Reasons to choose Real Estate over stocks

• Leverage
• Example: If one wanted to make 6.2% interest on $100,000 in a stock, one would have to invest a full $100,000 into that stock. However, in Real Estate, you can put $10,000 down on the $100,000 investment, it appreciate 6.2% in one year and then sell it for the full $100,000 + 6.2% interest accrued on the properly

Foreclosure

• Government is making it harder to obtain loans. New requirements in place to make sure that you can afford the loan before signing up for it.
• The government and loan companies were less strict before and people started to obtain loans they could not repay.
• Foreclosure is typically executed on a home after the buyer gets behind three mortgage payments (typically failing to pay for three months).
• The bank usually tries to warn the buyer prior to the foreclosure notice

Foreclosures buyouts occur the 1st Tuesday of each month. An attorney has to publish into the county's records publicly one month before the foreclosure is executed. Investors typically go to the courthouse to find out which homes are being foreclosed on and by up the remaining amount on the loan. The investor typically tries to work with the buyer directly to prevent foreclosure while renegotiating the terms with the buyer to make more money than the investor put up for the buyer.

Foreclosure Avoidance

1. Mortgage companies do not want to foreclose on homes due to both parties lose in that situation.
2. Establish a good relationship with the mortgage company so alternatives can be agreed upon in the case that the original terms to the loan are failing to work over time.
3. Contact the mortgage company in advance at the first sign of problems to repay the loan.

Bankruptcy Definitions:

Chapter 7, 11, and 13 bankruptcy definitions

Rearages: After one files a claim for bankruptcy, it is the increased payment to make up for the loan + late fees all in one package.

"An ounce of prevention prevents a pound of cure"

It is best to avoid bankruptcy at all costs as it causes heartache and grief for at least 3 - 5 years of your life. In addition to that, debtors usually sell your debt amongst each other create a continuous cycle of the same debt remaining on your credit for an indefinite period of time.

Before declaring bankruptcy, try to settle the debt with the creditor at a lower price. Most companies rather get something rather than nothing. If you do decide to do this, be sure to document all procedures and always obtain the agreement in writing. Always obtain a reference number, name and worker ID when working with customer service representatives.

Always dispute negative ratings that are in error on your credit. After a formal dispute is issued to a debtor, they have 30 days to challenge the dispute or it can be removed from your credit.

More Information on Disputing Credit Errors

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