What Should I Do If Im Having Trouble Paying My Mortgage
If youre having difficulty making your mortgage payment, contact your loan servicer right away. This is your chance to find a solution that might work for your scenario.
If youre nervous about contacting your servicer, or if youd like our help and advice, please contact a VA loan technician at . You can also email us at .
The Lender Could Sue You And/or Your Cosigner For The Amount
A lender can sue both the borrower and the cosigner for student loans in default, and the worst thing to do is ignore the lawsuit. If you ignore a lawsuit, the lender can seek a judgment against you.
The judgment means the lender can then take additional steps against you, including wage garnishment, freezing your bank accounts, and putting liens on any property you own.
A judgment can last for 10 years, or sometimes even longer, and as thats going on your debt continues to accumulate interest.
If you cant settle the lawsuit, you may have to file for bankruptcy. That wont eliminate student loans, but you wont have other simultaneous debts to pay off. There are also repayment bankruptcy options where you can make monthly payments over a period of anywhere from three to five years.
The Consequences Of Breaking Your Lender’s Trust
Andy Smith is a Certified Financial Planner , licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career.
The Balance / Chloe Giroux
You probably have good intentions when you borrow money, but finances dont always work out as planned. A job change or health event can quickly throw you off track, and eventually you may default on your loans. Its important to know how defaulting affects your financial health.
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Can I Get Va Financial Counseling To Help Avoid Foreclosure
If youre a Veteran or the surviving spouse of a Veteran, well provide financial counselingeven if your loan isnt a VA direct or VA-backed loan.
If you have a VA direct or VA-backed loan, you can contact us anytime to request that we assign a VA loan technician to your loan. Our technicians can offer you financial counseling and help you deal with your servicer .
If you have a VA direct or VA-backed loan and its 61 days past due, well automatically assign a VA loan technician to your loan.
If I Cant Avoid Foreclosure Will I Have To Pay Back My Loan
If your loan closed before January 1, 1990, and we have to pay back the amount of your loan to the servicer, youll need to pay this amount back to the government.
If your loan closed on or after January 1, 1990, youll have to pay back the amount of your loan if we find evidence of fraud, misrepresentation, or bad faith on your part.
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When Is A Personal Loan In Default
A personal loan in default means a payment is late by 30 to 90 days. The exact timing depends on the type of loan, the lender and the terms of your loan agreement.
Personal loans are delinquent, but not in default, if a payment is just a few days late. You may be charged a late fee after a grace period of 10 to 15 days. The fee can be charged as a dollar amount or a percentage of the payment due .
The payment must be at least 30 days past due for the lender to report it as a late payment to the credit bureaus. Late payments can knock as much as 100 points off of your FICO credit score if you have good to excellent credit .
Defaults not only damage your credit score they also stay on your credit report for up to seven years and can make it harder to qualify for new credit.
Dont Hold On Too Long
You havent paid yourself since the doors first opened. You have to beg, borrow, and steal to make payroll every month. I get it. This is the legend of entrepreneurship. Fight, claw, and battle your way through adversity, and come out clean on the other side. But it doesnt always work like that. Grit is good, but so is knowing when to call it quits. If you accumulate massive debt and plow all your savings into the business, it could substantially hurt your ability to successfully work out an SBA Offer In Compromise.
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Getting A Clear Caivrs
When it comes to student loans, if youre delinquent or in default, getting the debt repaid immediately is ideal. But thats not always possible, especially when the average college senior graduates with about $35,000 in student loan debt. If you can get into a repayment plan with the debt holder, you may be able to pursue a government-backed home loan.
Guidelines and policies for how this might work in practice can vary by lender. Some lenders may require a 12-month history of on-time repayments, while others may allow for a shorter repayment history. In any case, you will also need a clear CAIVRS. Some repayment plans will remove your delinquent student loan debt from the CAIVRS system once youve made on-time payments for a set number of months.
A loan officer can go over your specific situation in detail.
Defaulting on a government-backed home loan can lead to a three-year wait from when the government pays the foreclosure claim. This can be especially frustrating for borrowers who’ve discharged a government-backed loan through bankruptcy only to see it foreclosed on months or even years later. Not all federal loan defaults will wind up getting reported to CAIVRS.
Consumers can’t access the CAIVRS database directly. Talk with a loan officer in more detail about how to tackle a CAIVRS issue.
Chris Birk is the author of The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.
If You Are Not Separated From Your Job:
- There is a whole lot of opportunity in this case. The IRS has permitted for retirement plan administrators to allow for what is called a cure period. A cure period is essentially a grace period on your loan payment and can last no later than the last day of the calendar quarter following the calendar quarter in which the required installment payment was due.
- If your employer allows for a cure period there are two ways to get back on track and avoid default:
- You can pay back all missed payments during the cure period and avoid the loan going into default.
- You can refinance the loan and essentially re-amortize your payment over a new five year period.
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Think Carefully Before Taking Out A Loan
Sometimes, people default because they didnt thoroughly think through the loan.
Take a minute to really decide whether you are able to commit to the agreement of this loan for the length of time it has been set up for, advises Taylor. Think of potential negative outcomes and loosely plan for the worst while hoping for the best.
Its understandable that some situations are out of your control. However, Ross agrees that the best way to avoid defaulting on a loan is by making sure you can afford to pay back the loan before you even take it out.
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Set up a budget & avoid impulse decisions
You can do this by creating a budget if you havent already. That way, you know how much money you can allocate towards the loan payment while managing all your other expenses, Ross says.
She also recommends setting up automatic payments to ensure your monthly payments are being made on time.
Our experts also warn against making emotional decisions. Far too many consumers make poor choices in an overly emotional attempt to maintain the status quo, Petersen says.
Avoid the temptation of credit card offers unless you can pay the balance at the end of the month .
Dont Sell The Business Assets Without Permission
One of best ways to kill your OIC before it starts is to sell the business assets without your banks permission. Sometimes its an honest mistake. Other times, people are trying to sneak one past their lender in order to line their own pockets. Either way, the SBA takes selling assets without the bank giving you the green light will seriously jeopardize your chances to settle.
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Defaulting On A 401 Loan
Considering many peoples 401s are usually one of their largest retirement savings assets and many 401 providers offer the ability to borrow money, it can be very enticing to take out a loan from your 401 to help fund your next big purchase. 401 loans are quick, easy, and do not need a credit check. Unfortunately, there are some downsides to borrowing money from a 401 and understanding certain issues can help you make the right lending decisions as well as potentially avoid steep tax consequences. Particularly in this article I will focus on what happens when a 401 loan defaults and what options you have.
What Can I Do If I Default
If youre in risk of defaulting on a payday loan, contact your lender to explain your situation and attempt to negotiate your payment terms. You may be able to enter into a repayment plan to avoid having your loan send to collections and needing to appear in court. During this negotiation process, you should work on your budget. Find places where you can cut spending and cut it even if you dont default, youll still need to pay the original fees you took out for borrowing.
You may also want to consider a way to consolidate some of that debt to lower the interest rate. There are bad credit personal loans available, so you may qualify even if this default has impacted your credit score. Local banks and credit unions usually offer small loans that can help you move your debt from high-interest collectors. Discuss your situation and be upfront. It may take a month or two to qualify, but if youre at risk of defaulting or have defaulted, a small loan from a credit union could reduce the amount you pay in interest, potentially saving you hundreds.
Sometimes, though, default is inevitable. If you do receive a court summons, be sure you ask the collector to show proof that you owe the money. If they bring no proof, you may have grounds to postpone proceedings until they do.
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It Can Increase Your Tax Bill
Generally, canceled debt is counted as income for tax purposes unless you qualify for an exception. The Mortgage Forgiveness Debt Relief Act of 2007 was enacted to allow homeowners who lost their homes through short sales or foreclosures to escape a major tax penalty for mortgage debt that was forgiven.
Unfortunately, the Act expired at the end of 2013, and while an extension is being debated, its not set in stone. If you default on your mortgage with a significant amount owed and your lender decides not to pursue a deficiency judgment, it can come back to bite you at tax time.
You Could Have Your Wages And Social Security Garnished
Nothing is as unpleasant as getting a notice that you are going to have 15%-25% of your paycheck taken. Once that happens, you are kind of stuck unless you change jobs or file for bankruptcy. I even had an attorney tell me once that even after personal bankruptcy, the SBA still may be able to garnish social security.
One of the most common calls I get is from people who have received notice from their employer that the US Treasury is going to start wage garnishing their paycheck. If I get that call, its usually too late. Once they start garnishing, they are like a pitbull. They sink their teeth in, and dont let go. If the Treasury is taking $500 per paycheck, thats $12K per year or $60K over 5 years. Do you think at that point theyll be interested in taking your settlement offer of $10,000? Hint: nope.
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What Can I Do If Im Being Harassed By Collection Agencies
Each state and city has its own laws regarding payday loans. If youre being harassed by a collection agency, your most important step is to become informed about your rights and obligations under the law, including what agencies can and cant do when trying to collect the debt.
When dealing with a collection agency, know that its trying to scare you into paying whatever you can. Instead, stand firm when dealing with these aggressive collectors.
How am I protected by the Fair Debt Collections Practices Act?
The Fair Debt Collections Practices Act is a federal law that prohibits debt collectors from using abusive, unfair or deceptive practices to collect from you. Among the rules they must follow, a debt collector cannot call outside the hours of 8 a.m. to 9 p.m., call you at work, verbally abuse you or call your friends or family to collect on a debt.
If you receive a call that violates your rights, be firm with the caller. Tell them that you know your rights and that they must stop immediately. And then register a complaint with your states attorney general or the Consumer Financial Protection Bureau.
What Happens When You Miss A Payment Or Default On A Loan
Your credit score and credit history are important for many reasons, but this is especially true when it comes to applying for additional credit or loans. If your credit history is riddled with missed payments or defaulted loans, youll find it challenging to be approved for competitive interest rates and terms for any future loans or credit cards you apply for that is if youre approved at all.
And the worst part is that the consequences of missing payments or defaulting can negatively affect your credit for up to seven years. Being aware of what happens when you miss a payment or default on a loan can help you to be smarter with your finances. Heres what you should know.
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What Are The Options For The Estate
If a veteran dies, the spouse and/or beneficiaries will have to decide what to do with the property. The one thing you should know, though, is that the VA loan doesnt just go away. Someone has to pay the loan. The following options are usually available:
- Sell the home and use the proceeds to pay the loan in full
- Beneficiaries can refinance the loan into their name and make the payments
- Use mortgage life insurance to pay off the loan
The bottom line is that the VA loan must be paid one way or another. If no one pays the loan, the VA will foreclose on the property. This means that even if you inherited the property, you will not have access to it any longer. The bank will take possession of it and try to sell it to reduce the loss they incurred from the mortgage.
As a veteran, its a good idea to take care of what will happen with your home upon your passing. If you dont want your loved ones to be burdened with the debt, you may want to consider purchasing mortgage life insurance. This way you protect those that you love, avoiding financial stress in your wake.
Do You Know if You Qualify?
- No credit check required by the VA
- No employment verification required by the VA
- No home appraisal required by the VA
- Switch your ARM to a fixed-rate VA loan
- Lower your interest rate, save money
If you are a veteran with an existing VA loan or mortgage, you may qualify to save with a VA Interest Rate Reduction Refinance Loan, or VA IRRRL.
You Will Lose Your Entire Investment In The Business And The Sba Wont Care
When I work with a client to prepare theSBA 1150, the client often wants to convey how much money THEY lost as a result of this default. Every time this happens, I caution against it.
The SBA loan is debt, not equity. This means that when things go gangbusters for your business, the lender doesnt participate in the success. Along similar lines, when things go wrong, the lender isnt interested in giving you credit for your equity contribution or past loan payments. Whether you put $100,000 of $1,000,000 into your business, this will not be the focus of your SBA workout officer. Again, their focus is not on what you lost, but rather, how much you have left to pay them.
Theres only one reason I can think of that the loss of your investment might matter to your bank or the SBA. If the investment represented depletion of your personal assets. So if you put $250,000 into the business, and that represented 99% of your personal net worth, that will be considered because it means your resources are limited.
Borrowers often want me to let the bank know how much had been repaid on their defaulted SBA loan. If you include the interest I paid since I took this SBA loan, they reason, then theyve actually gotten all their money back! While I understand where you are coming from, banks dont look at it that way.
The bottom line is that regardless of how much you lost, you should not expect to get any brownie points or credit for it.
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