Alternatives to Bankruptcy

Loan Modification

Debt Negotiation

For individuals or corporations who do not wish to file for Bankruptcy or do not qualify for the Bankruptcy filing our office offers a Debt Negotiation Alternative. This process entails out of court settlements that require a lump sum payments to creditors in order to settle the account with them.

It should be emphasized that there may be tax consequences for forgiven debt. Waiver of debt may be considered as income by the IRS. This means that you will be liable for paying tax on the amounts that your debt is discounted for, unless some exceptions can be made.

Deed in Lieu of Foreclosure

Under certain circumstances, your mortgage servicer may agree to let you voluntarily transfer the title to the property to them. This may help avoid the impact of a foreclosure on your credit rating. This benefits the lender because it saves them the time and expense (including attorney fees, trustee fees, and eviction costs) of actually going through the foreclosure process and removing the borrower from the property. This is considered a sale of the property back to the lender. There may be tax consequences. This procedure is not done very often.

Forebearance Agreement 

It is possible to stop a foreclosure sale without filing for bankruptcy.  A forbearance agreement is an agreement between the lender/servicer and the borrower wherein the lender agrees to a plan for the borrower to catch up on mortgage payments that are behind. A forbearance agreement allows the Debtor to cure the mortgage arrears by making payments in addition to the regular monthly mortgage payments over a short period of time in an effort to bring the loan current.  In exchange, the mortgage company will postpone the foreclosure sale and allow the Debtor to complete the proposed payment plan.  A forbearance agreement is a resource to be used when the mortgage deficiency is caused by a short-term interruption in income, and the debtor is now making full wages and can make all the payments.  If the Debtor is not able to make a full mortgage payment and an additional payment, then a forbearance agreement will not be successful and probably will not get approved by the lender.

This plan is usually short term and demands that the borrower get caught up anywhere between 6 to 18 months. If the property is in foreclosure part of the agreement is that the foreclosure is postponed –not cancelled—and if the borrower falls behind in the payment plan the lender has the right to continue with the foreclosure. Usually no other changes are made to the loan--interest rates are not reduced and the loan balance is not reduced. Some call a forbearance agreement a loan mod but they are very different. A forbearance is relatively easy to get but difficult to pay.