In the simplest way of saying this, lets compare what happened during the mortgage crisis and whats happening now.  During the real estate bubble, individuals were purchasing real estate in lets say the West Village, New York.  And they didnt have any income verification or any money to put down for an apartment.  No problem.  Banks were giving out financing like crazy and so the purchasers would take out 100% financing.  Sometimes they would even walk away from their New York City purchase WITH MONEY in their hand after they purchased a unit for a few million.  We know how the story ends.  It’s not a stretch to say the majority of people who purchased homes in the West Village, Park Slope, Williamsburg, or anywhere in New York City with 100% financing have either foreclosed, are behind in their mortgage payments, or are having issues.

During this bubble, FHA wasnt a word that was used much.  The FHA is basically a government agency that insures the loans private lenders give out, and there were caps on those loans in 2004, 2005, etc.  Here is an explanation from the New York Times:

“F.H.A. insurance was created for minority and low-income families who could not come up with the traditional down payment of 20 percent required by private lenders. Buyers receive loans from government-approved lenders and are required to document their income and assets. They must pay a substantial insurance premium of 1.75 percent of the loan. But in return, their down payment can be as low as 3.5 percent”

So basically the FHA wasnt insuring very many loans then (proportionate to the loans being taken out.)  So if a purchaser just bought a new condo in Union Square New York, and he/she stopped paying, the bank was screwed, and maybe the underwriter of the loan, but not the government.

Fast forward to 2009.  This Manhattan Real Estate Attorney is seeing tons of deals being financed using FHA Loans, for individuals who have very little if anything to put down.  Sound familiar?  Well for the privilege of receiving an FHA loan, which now insures the Private lender that Uncle Sam will step in if the purchaser of that condo in the Financial District defaults, all the purchaser has to do is put own 3.5% of the purchase price.  And guess what?  The credit requirements aren’t too stringent to get a loan.  Lastly, a seller can actually give a concession to help the purchaser pay for the closing costs for his/her shiny new construction closing in Park Slope. Does any of this sound familiar?

Lets go a bit further.  That same New York Times article states:

“At Guarantee Mortgage Corporation, which has 150 mortgage brokers in the Bay Area, Seattle and Portland, Ore., F.H.A. loans have grown to about 15 percent of its business, from less than 3 percent a few years ago.

“”It sure has helped us put a lot of deals together,” said Guarantee’s chief sales officer, Bob Siefert. He predicts that a quarter of Guarantee’s deals will soon be guaranteed by the F.H.A.

Some F.H.A. borrowers here say they have the cash for a full down payment but would rather invest it in the stock market or use it for remodeling.”

And even more troubling, courtesy of the LA Times:

“This year alone the agency has backed nearly 2 million mortgages worth at least $328 billion. It insured 21.5% of all new mortgages last year, up from fewer than 6% in 2007.”

Look here is the issue for me.  If you’re looking to buy a condo in the East Village, and you have money for a downpayment, thats great.  Good luck to you and I’d love to be your East Village Real Estate Attorney.  And for the many people who are using FHA to buy homes they can afford all over Greenpoint Brooklyn, Williamsburg, or wherever, good luck to you too.  But this Manhattan Real Estate lawyer fears that FHA is being overused.  Really, the only distinction between this subprime mess and FHA is about 3.5%.  In other words, where before you could buy a condo in Harlem and finance all of it, now, after everything that weve gone through in the Real Estate market, you could buy a condo, but only finance 97.5%!  Its insanity to me.  Its almost like this is an artifical prop to the real estate market all over New York, let alone the country.  Except the difference is, when people start defaulting on their purchase of a Condo in Brighton Beach, the lender wont be on the hook, we will.

And some more news:  Representatives in Congress are looking at way of INCREASING the amount an individual can borrow to qualify for an FHA loan.  The limits on an FHA backed loan is now about $730,000.00.  Which means the government is insuring every penny of that loan if the purchaser defaults.  This is downright scary in my opinion.

In a Chapter 7 Bankruptcy in Brooklyn, Manhattan, or anywhere in New York City, the exemption (the amount you can keep) for tax returns is $2400 if you’re filing individually.  HOWEVER, that also includes the exemption for money you already have in your checking account, savings account, or in your pockets.  That means that if you’re receiving a tax return soon, you may be over the exemption limit and the Trustee may require you to fork over some moolah.  So…what to do?  You may want to hold off on filing until you receive your return, or you can look at what’s in your checking account at the time you’d like to file to make a determination as to whether you can keep that tax refund.  In any case, there are various solutions to effectively handle this issue.  Speak to your Brooklyn Bankruptcy Lawyer for more info about ways to save your hard earned returns.

Its been some time since we last blogged about Bankruptcy in Murray Hill, Bed Stuy, or anywhere in New York for that matter. Weve been working for the new site for some time. I hope all of you enjoy it. Having said that, here is the next in my series of video blogs surrounding the steps of keeping your home in a Chapter 7 Bankruptcy in New York City. In essence, the video discusses the things you should do if you want to determine if you qualify for filing Chapter 7 Bankruptcy in Manhattan, Brooklyn, or anywhere in New York. Hope you enjoy it.

Brooklyn Chapter 7 Bankruptcy Lawyer discusses keeping your home in Bankruptcy

1. Tell The Truth:  This has been covered before but I think its incredibly important to cover again.  Do not, in any way, fail to reveal information to your attorney and to the court.  That means more than fibbing about how much your car is worth (which one could easily find out anyway).  It means not transferring property to friends or loved ones a month or two before filing for Bankruptcy.  It means answering honestly when the Chapter 7 Bankruptcy Trustee in New York City asks you questions about your property/income/assets, etc.  You can almost always negotiate a settlement if you have non-exempt property in a Chapter 7 Bankruptcy in New York.  You CANNOT do that after lying on the record.  Its criminal and I know I sound like your mother but it is so important that your realize how much this can hurt you.  There are ALWAYS options available to you with respect to your property.  But your Chapter 7 lawyer can’t help you if you dont tell him/her the truth.
2. Be Prepared for the Meeting of the Creditors:  Each one of my clients has a conversation with me before the meeting of the creditors because it is so critically important that they be prepared for the questions the Trustee will likely ask.  Look, no one wants to file for Bankruptcy in front of people, especially in New York City.  You can be nervous, you can feel ashamed, you could have eaten something not agreeable before the meeting (that hurts everyone in the room when it happens).  In any case, before you file for Bankruptcy in New York City, make sure to ask your prospective Manhattan or Brooklyn Bankruptcy Lawyer if they will prepare you for the “341 meeting.”  Questions arise like : “Have you ever owned Real Estate”  ”Are you going to be inheriting under a will”  ”What’s the most you’ve had in a checking account in the past two years.”  You clearly have to answer them truthfully, but there is also a particular way they should be answered, especially if your answer is vague,  and thats what an attorney’s job is.

3.     Do not be combative with the Chapter 7 Trustee in Brooklyn.  I can’t tell you how ridiculous this is.  The person             that can potentially wipe out hundreds of thousands of dollars in debt is sitting two feet in front of you and          you’re going to give him an attitude.  Folks, I get it.  I’m not a regular attorney.  I know what its like to try and contain my emotions when I feel like I am being pushed.  If you can get by the 5 minutes of questioning then you’re golden.  You’ll be be able to wipe out tens if not hundreds of thousands of dollars off your books and sleep well again.  I know its tempting, but make sure to treat each person in that room with respect.  It will pay off.

So lets attack this : What happens to my car if I file for a Chapter 7 Bankruptcy in New York?

Well, your favorite Bay Ride Bankruptcy Lawyer says a few things can happen.

• If you lease your vehicle in New York and you file for Bankruptcy, nothing happens.  You either get to keep the vehicle and re-affirm it (unless its a new Mercedez Benz, which can indicate bad faith), or you can give it back and you’re no long responsible for the vehicle and its deficiency.
• If you own a vehicle and file a Chapter 7 in Brooklyn or Manhattan:  This depends on whether there is significant equity in your vehicle.  If there is no equity in your vehicle, and typically there is not since you’ve likely made a small down payment on the vehicle, your vehicle will depreciate quicker than you’re paying off your note on your vehicle.  In English, your car is worth less than whats owed on it.  Great, keep the car if you want or give it back.  Choice is yours.
• If you own a vehicle in Brooklyn or Manhattan (you’re crazy-the paring garage’s will take your first born its so expensive) and you have significant equity in the vehicle before you file for a Chapter 7 Bankruptcy in Brooklyn or Manhattan, you will have a choice.  You need to know, from your trusty Bay Ridge Bankruptcy Lawyer, that you can exempt up to $2400 of equity in the vehicle, or $4800 if you file jointly (romantic), which will be yours if and when your car is sold.  That means if your car in Bay Ridge, Park Slope, or Williamsburg is worth $10,000, technically the Bankruptcy Trustee in Brooklyn can only get their hands on $7600 of that equity if they sold the vehicle.  The remaining $2400 is yours.  But be forewarned that if you own your car outright OR have significant equity, the Trustee will likely sell your car and pay off creditors with the money (and give you $2400 or $4800.)
• You can also negotiate to purchase your car in a Brooklyn Bankruptcy…from yourself.  Lets say that car is worth $10,000, and you have your $2400 exemption, the Trustee is still going to have to pay expenses to sell your car (auction price, fees, shiny salesman guy, etc).  Therefore you make the Trustee an offer.  Your Brooklyn Bankruptcy Lawyer says to the Trustee:  ”Trustee (insert name), my clients are willing to give you $6000 for the vehicle in two payments of $3000 each.  Love (or sincerely), Brooklyn Bankruptcy Lawyer Daniel Gershburg.”  The trustee may accept this, or they may simply say I don’t like that offer make me another one.  Either way, if you have some disposable cash, you can and should be able to buy your car back.  On the other hand, for giving up a car worth several thousand, you’d also be able to get out of debt sometimes over $100,000.00. In any case, the choice is yours.

So now you know all (most) there is to know about whether your should file for Chapter 7 Bankruptcy in New York City if you own a car.  There are many more issues surrounding this topic, so please talk to a Bankruptcy Attorney in Bay Ridge, Park Slope, Williamsburg, Sheepshead Bay, or anywhere you may live in Brooklyn, before filing.