Bottom line: what can they take if I stop paying?

In today’s troubled economic times, there are many out there who aren’t candidates for bankruptcy and yet, could still benefit greatly from a consultation with a bankruptcy attorney. The problem is, they just don’t know it…

Let me explain. A bankruptcy attorney is the perfect corner man (or woman) for a fight with your bank. If you can no longer afford to make payments on a mortgage or are considering a strategic default, you need to know your potential exposure. What can the bank “do to you” following a default? In other words, do you risk losing assets in a collection proceeding or are you judgment proof? Perhaps somewhere in between?

Your bankruptcy attorney likely has the answers. Bankruptcy attorneys are well versed in state and federal exemption laws that will determine your level of exposure in the event of a default. If all of your assets are exempt, the bank may pursue you and eventually win a judgment, but they won’t be getting any of your property. On the other hand, significant non-exempt assets will be vulnerable to creditors.

Know Your Exposure

Ideally, anyone facing an imminent default on a mortgage should know their level of exposure before missing payments. However, if you already find yourself behind, it’s not too late. In many cases, a bank’s willingness to work with a borrower begins with the borrower’s unwillingness to pay the bank. The bank usually won’t come after you once you’ve missed your first payment.

At a certain level of default, banks write off loans as “non-performing” assets, with anything recovered thereafter considered gravy atop the almighty balance sheet. As many borrowers can attest, this does not mean that banks give away the keys to the castle. Write downs can be had, but at a price. For example, you might be required to bring significant cash to the table or execute a new long term note. Are you making a good deal?

Good Deal/Bad Deal?

Once you’ve entered past due territory, your bank has already dinged your credit. Therefore, the price you’ll be willing to pay to reach a deal is largely a function of your asset exposure, something most people out there simply don’t know. A bankruptcy attorney can identify blind spots in your creditor defenses which is why it’s a good idea to schedule a consultation if you’ll soon be in default on your mortgage or another loan. A bankruptcy attorney can tell you what you need to know: if you default and are pursued, this is what you stand to lose, this is what’s safe. Very important information when negotiating with a lender.