The most frequently asked questions that people want answered.
- Can I go to jail if I don't pay my mortgage?
- How much will this hurt my credit?
- How many points will my credit score drop?
- Can my lender come back after me and make me pay?
- Will I have to pay taxes on the money I don't pay?
- Will I have to declare bankruptcy?
- Can I get turned down for Bankruptcy?
- Where will I live once this is done? Will I be out on the streets?
- How long before I can buy a house again?
- Will I lose my job because of this?
- Where should I put the money I'm saving?
- Can my savings be taken from me by my bank if I default?
- Can my savings be taken from me by the bank if I declare Bankruptcy?
- Should I be looking a loan modification instead?
- Should I do a short sale instead of defaulting?
- Do I tell my tenants what I'm doing?
- Do I keep paying my association dues?
Can I go to jail if I don't pay my mortgage?
This may sound laughable, but it is one of the most frequently asked questions we get. The short answer is NO. You cannot go to jail for not paying a debt. Especially one that has turned out like this one has.
How much will this hurt my credit?
Based on the credit scoring system today, you would be able to buy another house in as little as 2 years. However, we believe the credit scoring of today will have to change based on the condition of most people's finances. If you want to make those changes happen sooner we have an agency we can recommend that will help you clean your credit record using the Fair Credit Reporting Act to your advantage.
How many points will my credit score drop?
It will depend on how much debt you are planning to clear and how you proceed with that plan.
Can my lender come back after me and make me pay?
The rules are different from state to state. It also depends on the new programs the government implements and the different tactics the banks use to try to get money from you. With a One on One consultation with a FRGI coach, we can answer these questions specifically based on your circumstances.
Will I have to pay taxes on the money I don't pay?
This speaks to the issue of your lenders issuing a 1099 for Cancellation of Debt (COD). If your lender experiences a loss from you giving your property back, if they cannot recover for whatever reason, they will issue you a 1099-C. In the recent Restoring American Financial Stability Act of 2010 most people will not have to pay taxes on a 1099-C from your lender.
Will I have to declare bankruptcy?
When our members are filing for bankruptcy, it is usually driven by the additional debt that is brought in, above and beyond the mortgage debt. Most people who just have mortgage debt do not find a bankruptcy necessary for their Financial Revival. However, each situation is different. Our members all have an attorney available to them who is an expert on bankruptcy and tax law. Their attorney helps them sort through the details to help them make that determination.
Can I get turned down for Bankruptcy?
Yes, especially if you don't plan for it. If you have too many assets or income you may only qualify for restructuring (having to pay back a certain percentage of your debt) as opposed to completely clearing the slate. This is another issue that our members get to work out with their FRGI provided Attorney.
Where will I live once this is done? Will I be out on the streets?
No way. Once this is all over you will find that you can rent a property that will fit your current lifestyle and probably do it for less money per month than you are paying now. We help you to prepare your application so that you can rent the property you want without worrying about whether your past financial situation will hold you back.
How long before I can buy a house again?
Based on today's rules (and we believe those rules will change dramatically over the next couple of years) you can buy a house in as little as 2 years with 3.5% down. There will be some work to do to get you ready but it is not hard. There are some cases where you can buy again the very next day, but those rules are tricky and almost nobody qualifies for them. Our belief is that the housing market will not hit bottom until 2014 or 2015 which will give you plenty of time to recover to be able to buy again, should you choose to.
Will I lose my job because of this?
We have not heard of anyone losing a job because of this but there are licenses that currently require good credit and when you credit suffers as a result of this, it is possible that certain licenses or clearances could be affected.
Where should I put the money I'm saving?
We don't know about you but most of us have taken a beating in the stock market. We believe that the banks and the stock market are going to suffer as a result of the coming economic downturn(s). If you have a financial advisor that you trust, you should have this conversation with them. If you would like us to refer you to a planner in our network, we would be happy to do that.
Can my savings be taken from me by my bank if I default?
The banks are not supposed to take money out of your account without your permission but we have heard of them doing it. If they take it, there is nothing you can do about it so we recommend you do not keep any money at a bank you owe money to.
Can my savings be taken from me by the bank if I declare Bankruptcy?
All of your assets will be considered in the event of BK whether it is cars, homes, cash or any settlement moneys you will receive in the near future. That is why it is so important to have a plan before you start moving in any direction.
Should I be looking a loan modification instead?
We tell our members that you can apply for a loan modification but you won't get one. We tell all of our members this and we are right more than 96% of the time. With that being said, the loan modification process is a valuable tool for our members.
Should I do a short sale instead of defaulting?
Short sales have proven to be another valuable tool for some of our members. Keep in mind that there is a certain process you must use with your lender in using the short sale in the HAFA program.
Do I tell my tenants what I'm doing?
Yes. We have a system our members use to make sure that you can still collect rents while you are in the process of giving your property back to the bank. The goal is to make sure that you collect rents and that your tenants are protected at the same time.
Do I keep paying my association dues?
This will vary from project to project. We have a list of questions for you to ask your association secretary that will help determine if it is in your best interest to continue to pay your association dues.