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Key Differences Between Wills and Trusts

It can be challenging to understand what documents and legal instruments to include when creating your estate plan. Do you need a will, a trust, powers of attorney – or more? Learning some key similarities and differences between wills and trusts is a good starting point. Wills and trusts can be used together or separately, but they do have some key differences that should be understood. Knowing the differences In order to effectively create a strong estate plan, you need to know the purpose and effect of various documents. A trust is a separate legal entity that either holds title to your property during your lifetime or takes legal possession of your property at the time of your death. By contrast, a will is a legal document that directs the distribution of assets upon the passing of its creator. A will allows you to specify who receives what assets from your estate. It can also verify your wishes for medical decisions and end-of-life care, as well as appoint a guardian to look after your children after your passing. On the other hand, a trust can disperse its assets before you pass on, and you have more control over how and when a beneficiary receives the assets. For example, you can specify that a beneficiary can only gain limited access to an account once they turn 25 and have full access to it once they turn 30. Lastly and notably, a trust will allow you to bypass probate, while a will is always administered through probate court. Which is right for me? It can be hard to know what choices to make to help you create the best estate plan for your needs. Thankfully, you can rely on the experienced guidance of an estate planning attorney. They can help you determine what options are right for you. Choosing to have an estate plan is the first step in protecting your wishes, and wills and trusts can help you accomplish this. That is why the attorneys at Gudeman & Associates custom tailor estate plans based on you and your family’s specific needs and circumstances. Contact us today to schedule a free estate planning consultation.The post Key Differences Between Wills and Trusts first appeared on Gudeman & Associates, P.C.. from Gudeman Law https://www.gudemanlaw.com/blog/2022/06/key-differences-between-wills-and-trusts/

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Key Differences Between Wills and Trusts

It can be challenging to understand what documents and legal instruments to include when creating your estate plan. Do you need a will, a trust, powers of attorney – or more? Learning some key similarities and differences between wills and trusts is a good starting point. Wills and trusts can be used together or separately, but they do have some key differences that should be understood. Knowing the differences In order to effectively create a strong estate plan, you need to know the purpose and effect of various documents. A trust is a separate legal entity that either holds title to your property during your lifetime or takes legal possession of your property at the time of your death. By contrast, a will is a legal document that directs the distribution of assets upon the passing of its creator. A will allows you to specify who receives what assets from your estate. It can also verify your wishes for medical decisions and end-of-life care, as well as appoint a guardian to look after your children after your passing. On the other hand, a trust can disperse its assets before you pass on, and you have more control over how and when a beneficiary receives the assets. For example, you can specify that a beneficiary can only gain limited access to an account once they turn 25 and have full access to it once they turn 30. Lastly and notably, a trust will allow you to bypass probate, while a will is always administered through probate court. Which is right for me? It can be hard to know what choices to make to help you create the best estate plan for your needs. Thankfully, you can rely on the experienced guidance of an estate planning attorney. They can help you determine what options are right for you. Choosing to have an estate plan is the first step in protecting your wishes, and wills and trusts can help you accomplish this. That is why the attorneys at Gudeman & Associates custom tailor estate plans based on you and your family’s specific needs and circumstances. Contact us today to schedule a free estate planning consultation.The post Key Differences Between Wills and Trusts first appeared on Gudeman & Associates, P.C.. from Gudeman Law https://www.gudemanlaw.com/blog/2022/06/key-differences-between-wills-and-trusts/

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The Importance of Having a Thorough Land Contract

Given the wealth of information available for free on the internet, many individuals and businesses have turned to sites like Legal zoom for contract templates in an attempt to avoid the cost of hiring an attorney to draft legal documents. Unfortunately, there are no shortcuts to ensuring your rights are protected. Every state has different laws and allowable provisions for different types of contracts. For the most part, these free and low-cost services do not provide all of the provisions necessary to protect your interests. This article outlines several important things to consider when deciding how to go about drafting and executing contracts that you won’t find in most pre-written online contracts. Responsibilities One of the most important aspects of any contract is to clearly and plainly state who is responsible for what. While this seems simple enough, there is an unimaginable amount of responsibilities that may never occur to you, until they come up. It is vitally important that your land contract outline which party is responsible for property taxes, maintenance of the property, ensuring compliance with local ordinances, as well as countless other responsibilities that may be unique to your particular situation. Default Provisions Another aspect of vital importance that is often underdeveloped in pre-written contracts is what happens when a party breaches the agreement? If you sell a property under land contract and the buyer stops making payments, what can you do to enforce the contract? Surprisingly, failing to outline the specifics of questions like these leave a buyer with very little recourse, and as a consequence seller’s can often breach the contract as often as they like, as long as they “cure” before a judgment is entered against them. Attorney Fees This is probably the most overlooked provision in pre-written contracts. When properly drafted, a contract can protect you from expensive litigation with a clause outlining who pays for attorney fees in the event a dispute arises. Beyond being able to recover legal expenses you incur enforcing the terms of a contract, the biggest benefit of having an attorney fee provision is that it provides a strong incentive for the other party to settle the dispute before you ever have to file a lawsuit. This article is far from comprehensive when it comes to outlining all of the necessary provisions and considerations that most people overlook when utilizing pre-written contracts. Drafting effective contracts can be a daunting task. Unfortunately, taking short cuts only makes life more difficult if a contract dispute arises. That is why the attorneys at Gudeman & Associates work hard to ensure your interests are well protected. Contact us today to schedule a free 30-minute consultation.     from Gudeman Law https://www.gudemanlaw.com/blog/2022/03/the-importance-of-having-a-thorough-land-contract/

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The Problem with Pre-Written Contracts

With the growing popularity of legal drafting web services and pre-written templates, it is easy to see the appeal. If you’re an individual in need of a lease agreement, land contract, operating agreement, or other documents, many of these websites offer free trials and low-cost solutions. With so many options available, it is hard to see why anyone would pay for an attorney to draft documents which are readily available online. Unless an issue arises between the contracting parties, many individuals execute these agreements and feel savvy for having avoided what they see as unnecessary legal expenses. Unfortunately, issues with contracts arise more often than most people realize. In the United States alone, over 250,000 civil matters are filed every year. While the vast majority of these disputes are settled prior to trial, the expense of filing, or responding to, a legal complaint will far exceed the cost of hiring an attorney to draft effective documents in the first place. Every type of contract can be written in infinite different ways, with a wide range of duties, protections, and legal remedies. Unfortunately, most of the contracts you’ll find through free or inexpensive legal document websites do not contain many provisions meant to protect the parties or explain the effect of failing to include such provisions. For instance, if you are drafting a land contract, mortgage, or other real estate transactional documents, the failure to clearly define the obligations of the parties and the remedies available in the event of a breach can leave you with little to no recourse, which can lead to long, expensive litigation. Drafting effective contracts can be a daunting task. Unfortunately, taking short cuts only makes life more difficult if a contract dispute arises. That is why the attorneys at Gudeman & Associates work hard to ensure your interests are well protected. Contact us today to schedule a free 30-minute consultation. from Gudeman Law https://www.gudemanlaw.com/blog/2022/03/the-problem-with-pre-written-contracts/

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4 mistakes to avoid while getting out of debt

Getting out of heavy debt is not easy, but it can be done. Bankruptcy is one possible option for debt relief. So are things like debt consolidation and negotiating settlements with your creditors. Whatever route you choose to take, watch out for these four common mistakes people in southeast Michigan routinely make. Failing to budget Part of getting out from under debt is drawing up a budget of your monthly expenses based on your income and sticking to it. Staying within your budget will make it possible for you to avoid adding to your debt total and help you gradually pay it off. Ignoring financial literacy One thing that might have contributed to your debt problems is a lack of knowledge of how finance works. There are low-cost financial literacy programs out there that can teach you how to keep your debt manageable. Using all your savings Everyone needs savings in case of a job loss or other sudden or unexpected financial emergency. If you have savings already, avoid the temptation to use it all to pay down your debt. Aim to keep at least three months’ worth of household expenses in the bank. If you have little to nothing saved, start now. Putting away even $100 a month would mean you would have $1,000 saved in less than a year. Trying to do it alone You don’t have to tackle the challenge by yourself. There are professionals in the Metro Detroit area who can help you, such as credit counselors and bankruptcy attorneys. These resources can give you the information you need to decide on a strategy that fits your lifestyle. from Gudeman Law https://www.gudemanlaw.com/blog/2022/03/4-mistakes-to-avoid-while-getting-out-of-debt/

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Tips that may help you avoid a tax audit

Tax season is here, and some filers scramble to get the help they need to get the numbers just right for a possible refund. But, sometimes, they get a surprise that the IRS has decided to audit their tax return. “What did I do wrong?” and “Why do I deserve an audit” are among the surprising questions you may ask. Certain things may be out of your control as some IRS audits are done at random. However, other times, tax filers’ oversights, mistakes and exaggerations may lead to an audit. Check and recheck the figures Consistency and normalcy are key characteristics to rely upon when filing tax returns. Here are some ways that you may decrease your chances of an audit: Check and recheck the math: This cannot be stressed enough. Whether you are filling out a paper tax return, relying on software or working with an accountant, this rule holds true every time. You do have some advantages with software and an accountant, but, in these instances, you also must provide the right data. Stick to the norm; no room for fabrications: The IRS can spot unusual claims and patterns. For example, it is not a good idea to claim that your charitable donations were more than your income. Make sure what you are informing the IRS is truthful and that you have the records to support your claims. Keep receipts and records. Some tax filers provide numbers that are too perfect without the support of records Have all the necessary tax forms: Missing forms such as 1099-MISC (for money earned for side jobs) or 1099-INT (for interest) and 1099-DIV (for dividends) may lead to an audit. Make sure to go through your mail, check online financial accounts to find those outlying forms. Remain cautious regarding tax deductions and credits: A deduction or credit from the previous tax year may no longer be available to you due to a boost in income. Double-check these, and, if you have questions, contact a tax professional. Fix any mistakes: If you must file an amended tax form, do so. This is added work for you but may help you avoid getting attention from the IRS. As noted, the IRS looks for patterns, and if it sees discrepancies from previous years, its auditors may come knocking. Work with an accountant who knows the most up-to-date tax laws: You want someone in your corner who is competent with the current rules. Perhaps your chosen tax professional is nearing retirement and continues to rely on knowledge learned 30 years ago. The chances of an audit are slight, but those chances still exist. By focusing on accuracy, you may avoid an audit. Do not sweat Each year, tax filers go through this same routine. You do not have to worry and sweat out things. As long as you keep things honest and rely on solid professional help, you may keep the auditors at bay. from Gudeman Law https://www.gudemanlaw.com/blog/2022/03/tips-that-may-help-you-avoid-a-tax-audit/

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What is an estate plan?

When most people think of estate planning, they think of Wills. While a Last Will and Testament is an important part of an estate plan, it is only one document, which does not provide an individual or family with all of the tools necessary to adequately protect their family’s future. An estate plan is a comprehensive collection of documents that work together to ensure your wishes are honored, and your family’s well-being is secured to the full extent possible. Below is a brief description of the most common estate planning documents, which most families need. Revocable Living Trust Any assets not accounted for by a trust must be distributed through the courts in a legal process called probate. A revocable living trust is a tool to plan for how your assets will be managed and distributed to your loved ones (“beneficiaries”) upon your death or incapacity. A trust can also outline important directives, such as who will care for your minor children if you are no longer able to through the use of an accompanying Will. If properly funded, an individual or individuals appointed by you (“trustee(s)”) can manage your estate, make distributions to your beneficiaries, and carry out your directives without the involvement of the court system. Trust Documents In addition to the trust itself, we will provide several accompanying documents to assist in funding your trust (discussed below), as well as to give authority to the Trustee(s) you select to manage your affairs once you are no longer able. These documents include: Certificate of Trust – This is a short document signed by the trustee that states the Trust’s essential terms and certifies the Trust’s authority without revealing private details that are not relevant to the pending transaction. Affidavit of Trust – This is a document used to prove the existence and certain terms of a trust, without disclosing the particulars of a trust plan. Along with specific pages from the Trust, it contains all the information that will be needed for conducting transactions with others. Trust ID Cards – Trust identification cards are simply wallet-sized quick access documents that include the name of the Trust, trustee(s), and other information necessary when managing affairs with banks and other financial institutions. Trust Funding Instructions – Once your Trust is created, your assets must be directed to it. This documentation will help you to make all the necessary changes with your existing assets, as well as to guide you in how to direct any future assets to your Trust you may acquire. Assignment of Personal Property: This document is necessary to transfer all your personal belongings to the Trust. This ensures that you can gift, divide, or otherwise distribute your personal property as you see fit. Personal Property Memorandum: Many of us have personal belongings we would like to give to someone when we pass on. This gift is called a “specific devise.” Your Trust will include a document that will allow you to direct your belongings to the individuals you want to have them. Anything not devised of this way can otherwise be divided among your beneficiaries as you wish. “Pour-Over” Will: The intention of a Trust is to distribute all your assets as you see fit. However, if there are any assets that have not been directed to the Trust upon your death, your Estate Plan includes a “Pour-Over” Will, which gives you the ability to direct how you would like any of those other assets distributed through the probate court. Durable Power of Attorney The Durable Power of Attorney may be the single most important accompanying document to your estate plan. This document allows a person of your choosing to manage your affairs in the event you should become incapacitated. In the event there is no Durable Power of Attorney, your spouse or other loved one would have to petition the probate court for an appointment as your conservator and guardian, such a petition can incur a long and expensive process. Healthcare Power of Attorney Like the Durable Power of Attorney, the Healthcare Power of Attorney allows a person of your choosing to act as your “patient advocate,” giving them the power to make medical decisions on your behalf to the extent allowed by the laws of the state. This document does not take away any power of medical professionals but allows your advocate to participate in the decision-making process. HIPAA Release: This document allows your health care providers to release your medical records to individuals of your choosing, usually your patient advocate. In the event of your incapacity, this will allow your advocate to obtain any necessary documentation to assist in participating in your care. HIPAA Release This document allows your health care providers to release your medical records to individuals of your choosing, usually your patient advocate. In the event of your incapacity, this will allow your advocate to obtain any necessary documentation to assist in participating in your care. Estate planning can be a daunting task. Unfortunately, failing to plan creates an even more complicated and expensive situation for those we leave behind. That is why the attorneys at Gudeman & Associates work hard to ensure your family’s future is fully protected when the unexpected happens. Call us today to schedule a free 30-minute consultation. During your appointment, we will cover the different documents and provisions available to build your estate plan based on your family’s needs and dynamics. from Gudeman Law https://www.gudemanlaw.com/blog/2022/01/what-is-an-estate-plan/

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After Having A Kid Do I Need To Update My Will?

While it may not be a priority when you are young and single, having a will becomes a necessity as you grow older. Furthermore, there are a number of reasons why you would update your will. For instance, if you get married, if your net worth and investments change, if a beneficiary needs to be changed, or if you have a child. Having a child adds a whole new dimension to your will. And, without direction from you through your will, things can happen that you did not want to happen. The following are some important reasons why you need to update your will after having a child.

Beneficiary

Before you had a child, your beneficiary on your will may have been your parents or a significant other. However, after you have a child, you may need to rethink this designation. If you do not have a significant other, you may want to leave your estate to your child. Whether you leave it to your child or to an adult, it is important to make sure this portion of your will is up to date. It would be terrible if you forgot to update your beneficiary and someone you did not want ends up with your estate. These are issues you can discuss with your attorney to figure out the best way to choose a beneficiary, with your child in mind.

Guardianship

This is probably the most important reason to change your will. You need to decide and add to your will who will take care of your child, should you pass away. This is not a decision that is made lightly. You want to decide ahead of time, who is going to raise your child and discuss the plan with that person. Without this direction, your child may be impacted, and issues may arise. For instance, guardianship would be determined by a court, not by you. Furthermore, the court may give guardianship to someone that you did not want to take care of your child. It would be terrible if guardianship of your child was handed over to someone you did not want taking care of them.

Schooling

Preferences for how you want your child to be schooled are important to add to your will. This way, if you die, there is no questions about it. You may want your child to go to private school, perhaps using money from an insurance policy. If you do not add this information to your will, whoever is the guardian of your child will have sole discretion about your child’s school.

Disbursement

After you die, your estate will be settled and any directives from your will can be adhered to. By keeping up with your will and identifying how your assets will be distributed, you can dictate what you want your child to keep and how you want any funds disbursed to your child. For instance, if you have a life insurance policy, you may not want your child to have full access to it until they graduate from college.

Expenses

There will surely be expenses and costs that your child will have as they are growing up. If your child is the beneficiary of your estate or even just of the monetary portion, and you decided they would not have access to the funds until they reach a certain age, you can earmark funds for specific reasons. For instance, you may want to give the guardian a stipend for taking care of your child. Or, you may want to allow the use of the money for things your child needs and for school. You can delineate what kinds of expenses can be paid out of the estate. This gives you a bit of control, even after you are gone.

As you can see, updating your will after you have a child is paramount. Without guidance from an updated will, your child(ren) may suffer and your estate may take much longer to settle. Staying on top of your will is important because as you get older, things change, and you need to make sure your will changes with it. This will help ease the transition for your loved ones by making sure your wishes are honored.

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None of the content in this article is legal advice. Please contact our attorneys to discuss your legal needs.

from Gudeman Law https://gudemanlaw.com/after-having-a-kid-do-i-need-to-update-my-will/

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Why Having A Will Saves You Time And Money By Avoiding Probate Court

A legal document which outlines the manner through which your property will be devolved in the event of your demise is referred to as a will. By having a valid will, you ensure that your property ends up where you want it to be. Therefore, it is important that you make a will if you have a family.

Probate can be defined as the process of proving and registering the will of the deceased. The person you appoint as the executor of your will handles your estate when you pass on. This is referred to as administration of the deceased estate. The executor ensures that your estate is settled properly and to the advantage of your beneficiaries.

The Executor’s Duties

For an executor to properly dispense his or her duties, the executor is required by law to obtain a grant of probate. A grant of probate confirms that: the author of the will is dead, that the will is authentic and the identity of the executor. An executor of a will can be a natural person or a juridical person such as a Trustee Company. Once the court grants probate, the assets of the deceased are entrusted on the executor. In order for you to save your loved ones from wasting time and money in probate court, you must ensure that you leave behind a valid will. Below is a detailed explanation of how a valid will saves your family from a probate court.

Cost of probate

The cost of probate can be quite high. The high cost of probate can eat into your estate significantly. Large amounts of money can easily be lost paying for: appraiser’s fees, court filing fees, and lawyers’ fees. Probate lawyers’ fees are calculated either on a percentage of the total value of the probate assets or on an hourly basis. The fees payable to a probate lawyer can also be a combination of the two. Fees payable to a lawyer can be significant regardless of the remuneration method.

Personal representatives are, by law, entitled to be paid for the services they render. Some states have in place a fee schedule for such representatives. Similarly, the fees paid to personal representatives is a percentage of the value of your estate. An executor may also be compensated for his or her services. This happens when the executor sells some of the assets of the estate or collects income generated by the estate.

Before your estate is distributed to your beneficiaries, your creditors, lawyers, personal representatives, and executors have to be paid. In order to raise money for this costly endeavor, your assets may be liquidated. If the assets are sold at a profit, an income tax is levied. This continues to decrease the amount that your beneficiaries will receive. At times, assets may be sold at a price that is less than their market value; to raise money to pay creditors and lawyers’ fees. The cost of probate is higher if you die without having executed a valid will.

The process of probate is time-consuming & Financially Draining

The minimum time required to fully complete probate is six months. Some probate processes take up to two years to end. This can greatly inconvenience your beneficiaries financially. Household expenses and other financial matters may be interrupted until the probate process is closed. However, on application, the court can release some assets before the end of the process. This will require your beneficiaries to spend more money on attorney fees. It is important to note that this happens regardless of whether you have a will or otherwise. The time taken to close probate proceedings takes a long time if you die without a valid will. By having a will, you minimize the time taken for probate: since you have already outlined how you want your estate to be distributed.

You personally decide how your estate will be devolved

A person who dies without a will is said to have died intestate. A will allows its author to decide how his or her property will be distributed upon death; it comes into force when its author dies. If you die intestate, the probate court decides how your property will be distributed. You will have no say on how your assets are shared.

You choose who winds up your estate

The executor you appoint in your will has the duty of winding up your estate. Executors are required to pay the deceased debts and, at times, manage the estate of the deceased for the benefit of the deceased beneficiaries.

None of the content in this article is considered legal advice. Call our attorneys to discuss a plan for your legal situation.

from Gudeman Law https://gudemanlaw.com/why-having-a-will-saves-you-time-and-money-by-avoiding-probate-court/

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What Are The Tax Benefits of Forming A Living Trust?

A living trust allows you to place your assets in it while designating someone you trust to administer the proceeds upon your death. The designee is bound by the wishes stated in the trust agreement. While you are still fully capable, you have the benefit of adding to, subtracting from, or making any changes that you deem necessary or prudent.

Will Vs Living Trust:The Differences

Several benefits are derived from this legal document. The most notable is that it avoids probate, which is the bane of a will. One of the major differences between a will and a living trust is that everything in the will is stalled until your death. The living trust allows more flexibility while you are still alive, and the length of time it takes for heirs to take possession of the assets is considerably shorter. With a will, it can take months or even years, whereas a living trust could conceivably take weeks. After the trustee has taken care of any obligations on your behalf, the estate can be dispersed according to your wishes.

A living trust gives you the power to designate someone you trust to take over your financial affairs in the event of incapacitation. This is a valuable consideration, which is unique to a living trust because it does not require any court involvement. With a will, the court will appoint a conservator if you do not have a durable power of attorney. He or she will have to receive court approval of any property sale or other expenses related to the will. Of course, you can eliminate that possibility by drawing up a durable power of attorney before the need arises.

While a living trust may provide tax savings for married partners, it generally does not offer any more tax benefit than a will. The costs to settle the estate will be less because it is not subject to the probate process. Beneficiaries can almost immediately receive any revenue from income-producing investments without too much disruption.

Protecting Assets From Creditors. Revocable & Irrevocable Trusts

A properly structured trust may shield assets from creditors, but the net tax effect depends primarily on the structure of the trust – that is, whether it is a revocable or an irrevocable trust. The government charges an estate tax to convey property to another person after someone’s death. It is based on the assessed value of any property left by the decedent. A revocable trust gives the grantor the freedom to make changes in trustees or beneficiaries and add or remove assets at will. He or she can even eliminate the trust altogether. When the owner of a revocable trust expires, the assets are placed in the decedent’s estate and are taxed. Because the trust, rather than the grantor, owns the assets in an irrevocable trust, it does not owe taxes.

While the grantor is alive, he or she must pay taxes on any income generated from assets in a revocable trust, while income from an irrevocable trust must be included on the tax returns of the beneficiaries. In either a revocable or irrevocable trust, any capital gains taxes may be less because the capital gain is computed on the property at the time of the grantor’s death, which could be quite sometime before the property is actually sold. Since the amount of the gain may be less, the amount of tax owed on the gain will be less.

Grantor Trust

Another approach to possibly reducing taxes in a living trust is the grantor trust, whereby the grantor can use personal exemptions from the sale of a trust asset, like the $250,000 exemption from the sale of a primary residence. Both revocable and irrevocable trusts are grantor trusts, but the grantor of the irrevocable trust must maintain some control over assets in order to qualify. This can be accomplished by becoming a beneficiary of the trust.

Finally, a revocable trust does not have to pay gift taxes, but the irrevocable trust requires that gift taxes are to be paid when assets are moved into it. This does not preclude the estate taxes that will have to be paid in either case. To receive the most benefit in the reduction or avoidance of income and estate taxes, it is wise to seek the advice of a qualified attorney.

Contact us now to speak to one of our attorneys.

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No content from this article constitutes or takes the place of legal advice. Please contact one of our attorneys before making any decisions.

from Gudeman Law https://gudemanlaw.com/living-trust-tax-benefits/

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Can You Buy A Home After Filing Bankruptcy?

The decision to declare bankruptcy is one that many people do not undertake lightly. They may need to do after falling in debt from medical bills or because of other causes beyond their control. In the aftermath of this declaration, many people wonder about the state of their finances.

One of the questions many filers have concerns home ownership. Owning a home has many benefits. It’s a great way to build equity and avoid paying too much for rent. Homeowners also benefit from tax breaks that are not available to renters, allowing them to deduct interest on the home loan as well as a certain amount of property taxes.

After filing bankruptcy, many people wonder if it’s possible to enjoy such benefits again. They may even have a home in mind. Those who have such a history can take heart. It is possible to buy a home even after a bankruptcy. However, it’s important for people to do their homework before they begin.

It May Take Time

One thing to keep in mind is that may take some time to buy a home after bankruptcy. A lender may ask people to show they have what it takes to avoid a foreclosure and pay the mortgage on time each month. Most people will file Chapter 7 or Chapter 13 bankruptcy. In general, lenders are looking for evidence that the home buyer has the means to manage their finances, afford the home they want and keep the home well maintained. To that end, they expect any prospective mortgage applicants to provide evidence that will depend on the type of bankruptcy they declared. Chapter 7 and Chapter 13 applicants will need to meet different requirements that can also vary depending on the loan company.

Chapter 7 Bankruptcy

This is a faster form of bankruptcy that lets people keep at least some of their assets and then use the remains to discharge their existing debts. However, it will remain on the creditor’s record for many years. People who have a Chapter 7 bankruptcy as part of their credit history have essentially a clock that begins when they file bankruptcy. Buyers who want to qualify for a government-subsidized mortgage such as an FHA loan or one through the Veterans’ Administration may only be required to wait two years from that first filing before they can apply for the loan. A convention mortgage may require up to four years before the buyer can qualify for a mortgage.

Chapter 13 Bankruptcy

Chapter 13 bankruptcies typically require the filer to agree to pay back any debt over a period of time. During this time, the filer must adhere to a certain budget. In general, they can qualify for a standard conventional loan through many lenders in as little as two years after filing this kind of bankruptcy. Qualifying for a loan from government organizations can be even quicker. The mortgage seeker may be able to get a loan in roughly twelve months from the time they file. Applicants should keep in mind that they might need to get permission from the people supervising their bankruptcy in order to take on additional debt.

Foreclosure

A foreclosure is when the homeowner walks away from a mortgage because they can’t pay it. The foreclosure is a different form of bankruptcy and has different rules that govern other types of bankruptcies. Like other forms of bankruptcy, the person will face a seasoning period in which they may not be able to qualify for a mortgage at all.

What Must be Done

For the foreclosure, the buyer will usually face at least a seven year wait before qualifying for a mortgage again. Under certain circumstances such as foreclosure for medical reasons, they may qualify in as little as three years for another mortgage. People who choose a short sale may qualify for a conventional loan in about four years while qualifying for an FHA loan in only three. Those who apply for any kind of mortgage after the foreclosure may face more stringent requirements. In general, they’ll need to have at least ten percent of the home value saved first.

Gudeman Law & Associates, P.C. bankruptcy experts in South East Michigan

None of the content on this article consitutes legal advice. Please contact our office to speak with an attorney on such matters.

from Gudeman Law https://gudemanlaw.com/buying-home-after-bankruptcy/

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via Gudeman & Associates, P.C. - Law Firm in Royal Oak. Specializing in business planning, estate planning, tax law, real es...

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