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Giving up the house – March 2016 Interview

Katherine:All right. It’s time for us to spend some time with Attorney Peter Daigle. He has been helping us understand bankruptcy and how it can help us get back on the right track in our lives. Again, I want to thank Attorney Daigle for being here with us. Thank you and welcome back. How are you?
Peter Daigle:Oh. Thank you, Katherine. I’m very well today. Thanks for asking.
Katherine:Awesome. Today, we’re going to talk about options, when someone decides to keep their home or not to keep their home. What does that look like for them? Then, we want to talk about second mortgages and liens as well. I want to get in to the first question. If a person decides not to keep their house, what does it mean for them?
Peter Daigle:In terms of bankruptcy, it means that you would be forgiven for your promise to pay the mortgage. The mortgage would stay on the home, because they have security interest but your promise that you would repay the money is no longer valid. They cannot come after you individually for it. You can walk away from it. It doesn’t affect your credit at all. It actually comes off your report, because again the debt … It would show that you no longer owe it. It would take you two years from a foreclosure, though, in a bankruptcy in order to purchase another home. It would prevent you for twenty four months.
Katherine:Okay, but that’s purchasing another home. What about renting a place to stay? I know we’ve talked a little bit about this in past months, but now I said, “Okay. I don’t want my house.” It goes back. I’m looking at a clean slate, but there’s a bit of an obstacle with purchasing a new home. What about renting a place?
Peter Daigle:Bankruptcy, in general, is fairly prevalent, so I don’t think it’s going to be a complete unexpected for landlords to see folks who have filed bankruptcy as they go along. I think a couple things, one is as long as you have the first and last months of security for the landlord, you’re going to give them some level of comfort in that you have the money. Also, you want to convince him, you have a job. More importantly, most people who need to file bankruptcy are for reason. It isn’t necessarily because they cannot pay the landlord. There have been some health issues, loss of a job, of course now the job is going again, they’re getting a divorce, and there has been an event to occur. If the landlord does ask about the bankruptcy, you can explain to him that this event did occur, but now I’m back on my feet. I have a job.

What we’re finding is that the only folks that are checking credit references are the really large landlords, some more of the institution landlord. Where the smaller landlords that own one or two properties aren’t doing it.

Katherine:Okay. Okay. That’s good to know. All right. What about a property that has had a lien on it? Am I able to put that in the bankruptcy? What happens there?
Peter Daigle:You can strip the lien off the house. If you filed for bankruptcy and you have a lien on the house and it’s affecting your homestead, which you’re entitled to have in every state then you can take the lien off. You can also remove second mortgages in Chapter 13, if there’s no equity on the house. If the value of the house is less than the first mortgage, you can also strip the second mortgage and discharge that debt as if it was a credit card debt.
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Katherine:Okay. That’s interesting, because I was thinking that a person would be stuck with that. Okay. What about a second mortgage, because people do that sometimes for whatever reason, to do repairs on the home, or just to have more money to do something maybe even start a business or something like that. If someone’s taken a second mortgage on their home, and they are thinking about filing bankruptcy.
Peter Daigle:Right. Exactly. They can be stripped. The house has to be what’s called underwater, meaning that you owe more on the house than what it’s worth. If you owe on the house more than what it’s worth, you’ve got the ability to strip that second mortgage. If the value of your house is two hundred thousand dollars, and you owe two hundred thousand dollars on your first mortgage and one hundred thousand dollars on your second mortgage, meaning you’d be upside down by one hundred thousand dollars. You can get rid of the second mortgage. You can get rid of in through Chapter 13.
Katherine:Okay. You’ve told us many opportunities, like everything I’ve given you, you’ve showed us a way around it, as far as a bankruptcy being a fresh start. Not necessarily the way around it like avoiding anything, but just helping people to maintain their dignity, to understand that things do happen, and it’s okay to push reset in their lives. One question I wanted to know, and I know we’ve … Again, there’s a lot of things if everyone go back and listen to the interviews we’ve done together over the past several months. We’ve answered a lot of questions. I want to go back to asking is there a limit on how many times a person can file bankruptcy? How many times can I hit reset?
Peter Daigle:Every eight years for Chapter 7. Every five years for Chapter 13. In a Chapter 7, every eight years you can wipe out one hundred percent of your debt. If you file for Chapter 13, you’ve got to pay some of it back. Not all of it, but you’ve got to make some effort to pay something back.
Katherine:Mm-hmm . Even looking at the rebuilding process, so this isn’t something for you to get out of debt free, but it’s the reset. Sometimes, we’re over our heads, and like you side, it can be medical expenses. We don’t know how to plan for those things. We don’t know something’s going to hit us and cost so many thousands of dollars and just have that stored up. It’s not possible more times, so this isn’t just get out of paying your debt, but this is to help you to reset when you have life circumstances that overwhelm you that you cannot seem to see your way clear of. This is a good way to just gain your footing again and begin again. Attorney Daigle, you’ve helped us so much, answered so many questions. Do you have anything that you want to add to what we talked about today?
Peter Daigle:Only to just, sort of, echo what you just said, is that you know it’s a long life and very rarely do I find anybody in here who comes to me that wants to be here. Life sort of got in the way, as a circumstance. I really, even people in my personal life, rarely do you know anybody that gets through it unscathed where something doesn’t occur. It isn’t always bankruptcy, but some kind of event that you really hadn’t planned on.
Katherine:Correct. Attorney Daigle, thank you so much for being here. Tell us about your free book, where many of our questions come from as well as how can people get in touch with you directly.
Peter Daigle:Sure, Katherine. Thank you. You can reach me by calling 508-771-7444. They can also go to my website Daiglelawoffice.com. There’s a way to order a copy of the free book right on the website. You can order it and we’ll send it out within a day.
Katherine:Thank you so much, and then until next month. Have a wonderful day.
Peter Daigle:Fantastic. You too, Katherine. Bye now.
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