When struggling to get out of debt, some people don’t realize that there are some clever ways to solve their debt problem. For example, in a Colorado Chapter 13 bankruptcy, someone can remove a second mortgage pay back income taxes to the IRS without penalties and interest, refinance cars by removing the negative equity, and obtaining a loan modificaiton
Colorado Chapter 13 bankruptcy has a few “tricks”. First, Colorado Chapter 13 bankruptcy is a way to eliminate a second mortgage. If you own a home that is worth $225,000 with a first mortgage of $250,000 and a second mortgage of $75,000, the second mortgage of $75,000 can be removed. During the last recession, this legal remedy was employed by thousands of homeowners whose homes were “underwater”. Before you feel guilty about it, remember, this practice is permissible under federal law. The process only works if the value of your home is worth less than the balance of your first mortgage. If your home is worth $251,000, you would not be able to remove the second mortgage.
Colorado Chapter 13 bankruptcy allows you to repay taxes without accruing future interest and penalties. Some taxes are dischargeable, which we’ll discuss later, but taxes from the last three years typically need to be repaid. A Colorado Chapter 13 bankruptcy is a way to pay your tax debt without incurring future penalties or interest. Again, the savings can be huge.
Another benefit of Colorado Chapter 13 bankruptcy is the ability to refinance cars. Financing cars is generally a poor financial decision because you’re paying interest on an asset that depreciates. As a result, you are likely to owe more to the bank than what the car is worth. Colorado Chapter 13 bankruptcy allows a debtor to refinance a car to repay what the asset is worth instead of what is owed. Assume you have a car worth $7,500 and owe $14,000. Under Colorado Chapter 13 bankruptcy, you can pay off the car at $7,500 instead of $14,000. You can also lower your interest rate. I’ve been able to help my clients reduce interest rates from 24% to 5% under a Colorado Chapter 13 bankruptcy. That is a huge savings.
One final benefit of a Colorado Chapter 13 bankruptcy is that you can qualify for a loan modification. A loan modification is a program that allows homeowners to lower their mortgage payment to 31% or less of their gross monthly income. The program suddenly gave hope to homeowners struggling to make mortgage payments or facing foreclosure.
A loan modification involves your lender modifying your existing mortgage payment to make it affordable. A loan modification can change the interest rate, restructure the term of the loan, and remove delinquent fees. A loan modification also allows an adjustable rate mortgage to be converted into a fixed interest rate loan.
The primary focus of a loan modification is reducing monthly payments to 31% or less of a person’s gross monthly income. For example, if your gross monthly income is $5,000 per month, then your mortgage payments should be $1,550 per month or less. If your mortgage consumes a higher percentage of your income, the goal of a loan modification is to reduce your monthly mortgage payment.
A loan modification is not available to someone who just wants to lower his monthly mortgage payment. The homeowner must show proof of financial hardship that warrants a modification, such as a pending foreclosure, bankruptcy, etc. Once the application is received, the mortgage company will evaluate the homeowner’s income, debt, and hardship eligibility criteria.
The best proof of financial hardship is by filing Colorado Chapter 13 bankruptcy or missing mortgage payments as this demonstrates the home may no longer be affordable. Such hardship can be caused by job loss, loan payment increase, decrease in income, divorce, medical expenses, etc. However, you don’t have to file Colorado Chapter 13 bankruptcy in order to qualify for a loan modification.
Loan modifications are all the rage today and probably won’t be a long-term solution though. If it’s an option for you today, then take advantage of the opportunity now as there are some great benefits to obtaining a loan modification.
If you want to find some clever ways to get out of debt such as filing Colorado Chapter 13 bankruptcy or obtaining a loan modification, then call Heupel Law to schedule a FREE consultation at (303) 955-7570. Heupel Law is located at 2440 Stout Street, Denver, CO, 80205. For more information about Heupel Law, visit www.HeupelLaw.com or watch this video again: http://youtu.be/Xu6A1BwW6xs