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Life After Bankruptcy

Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

  • Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
  • Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
  • Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
  • Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit:

  • If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
  • Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
  • Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.


While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

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Reverse Mortgage Alternatives

Even if you do not qualify for a reverse mortgage, there are other options.

A Reverse Mortgage can be a useful tool in helping seniors to maintain their independence and stay in their homes as long as possible after retirement.  But, a reverse mortgage is not without limitations.  People with a high value home may be shocked at how little they can qualify for in a reverse mortgage because of the loan limits with FHA.

To fill this void in the market, a relatively new product called equity sharing has been designed to help those that don’t qualify for a reverse mortgage.  Even if you do qualify for a reverse mortgage, equity sharing can be an alternative that is not a mortgage and does not accrue interest.

With equity sharing, the property owner (age 65 to 85) agrees to share the future appreciation of the property with the financial institution in exchange for cash today.  The home owner is allowed to keep 100% of the equity based on current appraised value.  Then, going forward, the home owner will split the appreciation 50/50 with the financial institution.  As compared to a reverse mortgage, equity sharing does not have an interest rate accruing, it is not recorded as a mortgage on the property, and it can be used on properties other than the owner’s primary residence.

Example 1:

A home owner in California has a primary residence that is worth $1.2 million with a current mortgage balance of $500,000.  Because the maximum allowable reverse mortgage is $417,000, this home owner would not qualify.  But, with equity sharing, he could get up to $180,000 in cash (15% of the current appraised value) without a loan or a monthly payment, and without the need to payoff the current mortgage balance (assuming the current mortgage is not a reverse mortgage or a negative amortization loan).

Example 2:

A home owner in Tennessee has a beach house in Florida.  He wants to get a reverse mortgage on the beach house, but doesn’t qualify because it is not his primary residence.  The house is worth $750,000 with a current mortgage balance of $300,000.  He would qualify for $112,500 in exchange for a 50% stake in future appreciation.  Ten years from now the home owner sells the house for $1.2 million.  The difference in equity is $450,000 since agreement was made.  The equity partner takes $225,000 (half of the appreciation) plus an 8% surcharge to cover transfer costs and Realtor fees, leaving the owner with net proceeds of $879,000, plus the $112,500 already received at the time of the agreement.

While it does create opportunities, equity sharing is not without its disadvantages.  Depending on how rapidly you think the home will appreciate, the costs could significantly outweigh the costs of a reverse mortgage or other interest bearing alternative.  That being said, it is one of the more realistic alternatives to reverse mortgages available today.

If you would like to find out more about a reverse mortgage or an equity sharing program, send me an e-mail at steve@steverussellonline.com with your name, phone number, date of birth, state where the porperty is located, and the value and mortgage balance on the property.  Or, call me toll free at 888-257-8383 for a free consultation.

Pensacola Mortgage

Why Is The Government Bailing Out Everyone?

In an unprecedented financial crisis it seems like the tax payer is the real loser.

Bear Sterns, Fannie Mae, Freddie Mac, Lehman Brothers, AIG…..what does all of this mean to you?  Why are some companies being bailed out while others are allowed to fall on their face?  It is a complex question being answered by your tax dollars, and the answers change from one day to the next.  Just 2 days ago, the official opinion of the Treasury was that there would be no bailout of AIG (the nation’s largest insurer).  Less than 48 hours later they are writing a check for $85 billion.  So how is it in the best interest of the country to bailout these corporate executives that made bad decisions?

For starters, every situation is different, and the government is not bailing out every company that steps up to the bread line.  Those that are allowed to fail without creating widespread devastation in the economy is, in my opinion, good for the over all health of the economy.  The ability to assume risk and fall flat on your face is actually what makes a free market economy work.  IndyMac Bank for example was a huge financial institution.  Yet, they were allowed to fail because there are dozens of other companies performing similar functions in the market, and therefore it is not the responsibility of the governemt to step in and help.  In that example, since most depositors were covered by FDIC insurance, there was little affect to the end consumers and account holders anyway.

The Fannie Mae and Freddie Mac takeover was different.  With over $5 Trillion in combined assets, the collapse of Fannie and or Freddie could have widespread implications in the credit markets and significantly hinder mortgage lending.  But, in the case of Fannie and Freddie, the government took over operations.  Their business was significantly less risky than the subprime lenders that have had so much trouble.  But because of their shear size, they have been affected by the current housing market.

AIG is a much different situation than any other that we have faced.  The significance of AIG is that more than 100,000 employees work for the company, and a collapse would affect so many sectors of the economy that it could create a ripple effect that is almost immeasurable.  The $85 Billion being provided to them by the FED is actually a short term loan, and the collateral for the loan is the entire $1 Trillion dollar asset portfolio of the company.  From a simple bottom line lending standpoint, it appears to be a no brainer, and for me to say that is really something.  I’m not in favor of the government bailing out anyone, but, an $85 Billion loan backed by $1 Trillion in assets that also saves over 100,000 jobs just makes sense.

Ultimately, we are in unchartered territory and no one knows what the long term affects will be.  But there is a light at the end of the tunnel.  For those who are even remotely in the market to buy a home, the events transpiring are creating unprecedented buying opportunities.  At the same time, for those in an adjustable rate mortgage, the market is ripe for a refinance with fixed rates as low as 5.25% (see SteveRussellOnline.com for current pricing).  In every market, there are winners and losers.  Those who have the fortitude to seek out these buying opportunities will be in a position to build wealth like nothing we have seen in generations.

Buy A Home For The Price Of A Used Car?

While many home owners suffer across the country, the current market is creating unprecedented buying opportunities.

It is no secret that every story has two sides.  You are pummeled in the media on a daily basis with the stories of doom and gloom about today’s housing market, and its affect on home owners nationwide.  What you may not have heard about is the flip side of the coin which is the buying opportunities that are being created.

Throughout the last century, more millionaires have been created through real estate than all other business combined, and right now there is a clearance sale going on that could change your financial future.  That may sound a little sales pitchy, but it is true.  Those who position themselves correctly today will be poised for financial independence tomorrow.  Those who listen to the mainstream media can sit back 2 years from now and talk about what they could have done but didn’t.

As reported on Good Morning America this morning, in Detroit, Michigan there are currently 1745 homes on the market for less than $10,000.  That’s not a misprint.  When you can buy a home for less than you would spend on a decent used car, there is a tremendous opportunity to create wealth and income.  It is not just Detroit though, there are amazing buying opportunities all over the country right now, and if you are even considering buying a home, now may be the time.

Here are some free resources where you can find distressed properties nationwide.  (some are free trials, but still worth visiting)

www.PreForeclosureFSBO.com (click on Investors)

www.Trulia.com (this one is general property listings, but they have an extensive database nationwide)

www.RealtyTrac.com (over 600,000 active foreclosure listings nationwide)

www.Foreclosure.com (free foreclosure search nationwide)

Foreclosures Up….Again

Nationwide foreclosure statistics continue to rise.

According to RealtyTrac, the number of foreclosures nationwide are up 14% over last month and over 121% over the same period last year.  For the 2nd quarter of 2008 there were more than 740,000 foreclosures filed nationwide.  That equates to more than 8000 foreclosure filings per day.

While this is a frightening statistic, there is a light at the end of the tunnel.  As we continue to see the bulk of foreclosures move through the system, a bottom in the housing market is eminent.  Some estimates claim that we will see a bottom before the end of the year.  For some areas of the country, the bottom has already come and gone.

This long term outlook is good for just about everyone except potential buyers.  Those who wait for a bottom before buying may very well lose any gains through the monthly payment as mortgage rates have now risen to the highest level in almost a year.  Over the last 9 months, we have seen the best buying opportunities available in decades, and those opportunities are going to become more scarce as we get closer to a bottom.

For those sellers still experiencing pain with their home, check out PreForeclosureFSBO.com.  There you can find resources to help sell your home through a short sale and avoid foreclosure with the help of a nationwide database of investors, and help finding a local professional to get the job done.

Celebrities In Foreclosure – Latrell Sprewell

Even though he once turned down a 3 year deal for $21 million, Latrell Sprewell might re-think that deal today.

MILWAUKEE — Former NBA star Latrell Sprewell‘s home is up for foreclosure and his yacht sold at auction to help pay off the $1.3 million he owes on the boat, according to court filings.

Sprewell, who once turned down a three-year, $21 million contract extension saying, “I’ve got my family to feed,” has apparently fallen on tough times.

Latrell SprewellSprewell

RBS Citizens NA, or Citizens Bank, filed a foreclosure suit last week in Milwaukee County for the $405,000 home Sprewell bought in the Milwaukee suburb of River Hills in 1994.

In court documents, the bank said Sprewell owed $295,138 in outstanding payments plus interest.

Sprewell failed to make his mortgage payments of $2,593 per month from September 2007 to January 2008, the documents said.

The Associated Press tried to reach Sprewell for comment Monday but a telephone number in his name was disconnected. A message to one of his attorneys, Robert A. Gist of Atlanta, and an agency in New York were not immediately returned.

The 37-year-old Sprewell played 13 seasons in the NBA for the Minnesota Timberwolves, the New York Knicks and the Golden State Warriors. The Milwaukee native was a four-time All-Star, but perhaps best known for choking coach P.J. Carlesimo during a Warriors practice in 1997.

He hasn’t played professional basketball since turning down the $21 million extension from the Timberwolves during the 2004-05 season. He was making $14.6 million at the time.

Last month, Sprewell’s 70-foot yacht, named “Milwaukee’s Best,” was sold at auction for $856,000 to a man from Milwaukee.

It was originally worth about $1.5 million. The bank holding that mortgage, New York-based North Fork Bank, asked that it be seized to pay off $1.3 million in debt.

Sprewell’s firm, LSF Marine Holdings, hadn’t made its $10,322 monthly payments on time or maintained the necessary insurance on the boat, the bank said. Sprewell bought the yacht built by the Italian firm Azimut-Benetti in 2003, according to court records.

A federal marshal seized the boat last summer in Manitowoc, about 80 miles north of Milwaukee, where it was in storage.

The sale price means the bank is still owed about $500,000, and it said in court filings it plans to go after the rest.

Last week, prosecutors in New York said they’d drop their case against Sprewell, who was accused of assaulting his girlfriend in front of their children. Prosecutors in Westchester County said the charges will be dismissed in a year if Sprewell stays out of trouble.

Copyright 2008 by The Associated Press