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Regardless of the means by which they seek debt relief, many people will observe some effect on their credit rating as they take steps to rebuild financial strength. But Chapter 7 bankruptcy, Chapter 13 bankruptcy, and debt settlement strategies offer such potent relief to individuals and married couples that this can be merely a speed bump on the road to financial recovery.
For those who, like many Arizona homeowners, have negative equity in real property like a home, investment property or vacation residence, an involuntary foreclosure, loan modification or short sale may be the best way to proceed. A Phoenix debt relief lawyer can help you understand the long-term implications of these options and help you assess which choice meets your unique goals.
A recent study by the Fair Issac Corporation (FICO) took a close look at how mortgage delinquencies impact FICO scores, which are a primary factor in mortgage lending decisions. The study looked at three hypothetical consumers with baseline FICO scores of 680, 720 and 780, and showed an average reduction of about 70 points for borrowers who are 30 days late on mortgage payments.
Not surprisingly, the decrease continues for borrowers who are 90 days late, but the effect is minimal for the borrower who started with the lowest score. However, the most interesting finding was that the FICO score effect was essentially the same for property owners who chose to let the foreclosure process take its course and those who completed a short sale with a deficiency balance (meaning the sale proceeds did not eliminate the amount owed on the original mortgage). Other strategies, such as deed in lieu of foreclosure and debt settlement, had a lesser effect on the credit score.
The study produced similar results when assessing how long it takes for FICO scores to recover. Not surprisingly, it takes considerably longer for a borrower with a higher score to recover from the negative effect of late payments, short sales or foreclosure.
Beyond the limited considerations of hypotheticals, a wide variety of factors play into a proper consideration of whether bankruptcy or another option will best serve an individual’s needs. A consultation with an Arizona bankruptcy attorney can help potential clients make informed choices that target future financial health.
Legal Insights On Foreclosure And Short Sales
Understanding the complexities of foreclosure and short sales can be daunting, thankfully a Foreclosures, Short Sales and Credit Ratings Lawyer can help. With over ten years of legal experience, we at Wright Law Offices are here to offer clarity on some of the most common questions we encounter. Below, are some legal insights to help you make informed decisions about your property.
What Happens When We Miss Mortgage Payments?
Missing mortgage payments can lead to serious consequences, including foreclosure. Typically, lenders allow a grace period before considering foreclosure. Communication with your lender is crucial; they may offer alternatives such as a repayment plan, loan modification, or forbearance. Proactive steps can prevent foreclosure and protect your credit score.
How Does Foreclosure Affect Our Credit?
Foreclosure significantly impacts your credit score, often dropping it by 200 to 300 points. This negative mark can stay on your credit report for up to seven years, making it challenging to secure new loans or credit lines. However, taking steps to improve your credit post-foreclosure, such as timely bill payments and reducing debt, can gradually restore your creditworthiness.
What Is The Difference Between A Foreclosure And A Short Sale?
Foreclosure occurs when the lender takes possession of the property due to non-payment. This process is typically initiated after several missed payments and can result in the homeowner being evicted. A short sale, on the other hand, involves selling the property for less than the outstanding mortgage balance with the lender’s approval. This option can be less damaging to your credit than foreclosure and may provide more control over the sale process.
Can We Still Live In Our Home During A Short Sale?
Yes, you can remain in your home during the short sale process. The sale itself can take several months, and during this time, you are still the property owner. Staying in the home can also help maintain its condition and curb appeal, potentially attracting more buyers and facilitating a smoother sale.
Are There Any Tax Implications With Short Sales?
Short sales can have tax consequences. The forgiven debt in a short sale is considered taxable income by the IRS. However, there are exceptions and relief options available, such as the Mortgage Forgiveness Debt Relief Act, which may exclude the forgiven debt from taxable income under certain conditions. Consulting with a tax professional can help you understand your specific situation and available relief options.
Taking Action
Facing foreclosure or considering a short sale can be overwhelming, but you don’t have to go through it alone. Our team at Wright Law Offices is here to provide guidance and support every step of the way. If you have more questions or need personalized assistance, don’t hesitate to reach out to us. We’re committed to helping you find the best solution for your circumstances, as you discover your fresh start. Contact us today to schedule a risk-free consultation and take your legal first step toward resolving your property concerns.
Why should you hire our firm to represent you in bankruptcy?
Great question. Here are a few reasons:
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Our Locations
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Phoenix Office
Wright Law Offices
2999 N. 44th St., Ste 250
Phoenix AZ 85018
Telephone: 602-456-6085 / 866-703-3287
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Scottsdale Office
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7135 East Camelback Road, Ste 230
Scottsdale AZ 85251
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Tempe Office
Wright Law Offices
2238 S. McClintock Dr.
Tempe AZ 85258
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Avondale Office
Wright Law Offices
12725 W Indian School Rd, Suite E-101
Avondale AZ 85392
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4856 E. Baseline Rd. Suite #104
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20325 N. 51st Ave., Suite 134
Glendale, AZ 85308
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Wright Law Offices
3623 Crossings Dr Suite 334
Prescott, AZ 86305
Telephone: 602-932-6600
Prescott Law Office
What our clients are saying…
Mr. Wright and his staff were amazing. They made a negative situation a lot better and turned it into a positive. Could really tell they care helping people and I will refer their Phoenix Bankruptcy Attorney firm to friends and family. Thanks again.
I called around looking for the right bankruptcy lawyer and came across Benjamin Wright. He personally called me for the consultation seeing how I live in Kingman AZ. He was very helpful from the start and his staff was very friendly and explained any questions I had, sorry for all the questions. I would definitely recommend Wright law offices, and I do!! Thanks for everything, you made what seemed like a hard thing to do simple!! You guys rock!!!
Great lawyer, he really helped my mother out of a jam. She was totally new to bankruptcy and he talked with us for about an hour and a half to make sure she wouldn’t be worried.
Ben is a kind and down to earth attorney. He worked around my busy schedule as a single mom (school, full-time job, and daycare pick up and drop off times). He explained absolutely everything to me and was good about e-mailing. I am writing this review as a THANK YOU.
I had a very positive experience with Attorney Wright. He or his staff returned my e-mails and calls promptly (even after business hours occasionally). His fees were reasonable. He was patient with me when I showed up in court missing an important document. He is aggressive, but fair and nice.
How does Chapter 13 bankruptcy work?
For individuals who maintain a steady income but are grappling with debts that need more time to be cleared, Chapter 13 bankruptcy could provide a viable solution. This form of bankruptcy enables debtors to retain their property while adhering to a three to five-year repayment plan. In Scottsdale, the bankruptcy attorneys at Wright Law Offices utilize their expertise in developing personalized Chapter 13 plans that are uniquely designed to suit your circumstances and work in your favor.
What role can a lawyer play in tackling credit card debt?
When credit card debt spirals beyond control, the feelings of isolation and stress can be daunting. However, with a knowledgeable lawyer by your side, the situation can be transformed significantly. Lawyers are experienced in negotiating with formidable credit card companies, often succeeding in achieving reduced interest rates or a minimized debt total. At Wright Law Offices, located in Phoenix, our committed legal team stands ready to help you take back control of your financial situation and direct you towards other potential debt relief avenues like bankruptcy.
What happens when foreclosure is knocking on my door?
The prospect of foreclosure can make it seem like your world is tumbling down. Yet, it's vital to remember that there are legal routes available to navigate this challenging situation. Foreclosure is a process initiated by lenders when mortgage payments are overdue, leading them to recover their loan by selling your property. While it sounds intimidating, our adept team at Wright Law Offices in Tempe is here to assist. We guide you through every step of the process, thoroughly exploring all viable options, such as loan modification, bankruptcy, or even contesting the foreclosure in court.
What is a tax debt lawyer's role?
Being in debt to the IRS can create enormous stress. However, a tax debt lawyer can intervene and significantly improve your situation. They're skilled in negotiating a viable payment plan with the IRS, striving to reduce the tax debt you owe, and in certain scenarios, even getting penalties and interest absolved. The proficient team of Scottsdale tax debt lawyers at Wright Law Offices is committed to helping you face this challenge with optimism. Leveraging our deep knowledge of tax law, we're dedicated to securing the best possible outcome for every client we represent.