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L.A. Bankruptcy Can Help Stop the Rise of Foreclosures

By Encino Bankruptcy Attorney on November 11, 2011

The number of foreclosures in Los Angeles are returning to the high levels that Los Angeles bankruptcy lawyers witnessed last year‚ meaning many people are again in trouble with their banks.

Last fall‚ many major lending institutions put a hold on or significantly cut back on filing foreclosures after allegations of robo-signing and fabricated documentation was found in foreclosure cases. Robo-signing is when banks hired outside companies to file foreclosures and rather than get bank officials to sign documents‚ they process so many that unqualified personnel signed and notarized documents.

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There are also allegations that banks made up documents — paperwork that should have been filed when the foreclosure was initiated‚ but was instead created after the fact — so they would have a better chance of stealing the house back from borrowers‚ whose rights were trampled in the process.

Many homeowners are being forced to make very difficult decisions about their living situation. With unemployment rates high‚ people are having to choose where and how to spend their money. Many are using credit cards as a stopgap measure to get by and the bills are piling up.

One option that may be viable is a short sale in Los Angeles. Since a large portion of homeowners are under water‚ meaning their mortgage is for more than the house is worth‚ a short sale may help. In a short sale‚ the homeowner finds a buyer and negotiates with the bank to ensure they won’t be liable for the difference between the sale price and what’s left owed on the mortgage.

Many times‚ though‚ banks won’t agree to that because they can sell the house for close to the sale price at auction and still have the option of coming after a borrower for the difference‚ called a deficiency judgment. This can be devastating to a family that gets out from under a house that has plummeted in value.

But bankruptcy in Los Angeles may be a far better option for many homeowners. In bankruptcy‚ homeowners can discharge years of debt that has built up in this bad economy‚ which can enable them to again make mortgage payments.

And filing for bankruptcy immediately stops the foreclosure process. That means that if your house‚ whether it’s one payment down the road toward foreclosure or set for auction‚ can’t be taken from you. Once debt issues are resolved through bankruptcy‚ it’s possible you can continue to live in your house after it’s over.

According to the Associated Press‚ there were 77‚733 properties that received an initial default notice in October‚ a 10-percent hike from September. States such as Florida‚ Pennsylvania and Indiana recorded the biggest increases on a state-by-state level.

The article suggests that after a year of delay in filings‚ banks are again going after homeowners who have missed payments rather than attempting to negotiate and help people stay in their homes. About 6 percent of homeowners have missed two or more payments‚ an increase from the second quarter.

The article points out that 22.5 percent of all homeowners are under water in their mortgages‚ which equals about 10.9 million properties. On top of that‚ 2.4 million additional borrowers have less than 5 percent equity in their home. Without the glut of foreclosures off the market‚ prices won’t increase and the industry will continue performing poorly.

Nader‚ Naraghi & Woodcock‚ APLC will provide a free consultation to help guide you in making a decision that works for you. In Encino‚ Glendale‚ and San Fernando Valley‚ just call (800) 568-0707.

Additional Resources:

Foreclosure activity hit 7-month high in Oct.‚ by Alex Veiga‚ Associated Press


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