Bankruptcy is an option for consumer debtors who have fallen behind on their mortgage payments. If your lender has initiated a foreclosure action or has requested that you short-sell your property or execute a deed-in-lieu of foreclosure, you may wish to consider other options that will permit you to remain in your home.
Most lenders offer loss mitigation or modification options. Borrowers who qualify for mortgage modification may see their interest rates lowered, principal balances reduced or mortgage term extended so that the monthly payments become more manageable. In some instances, lenders may be willing to recapitalize mortgage arrearages, rather than requiring the borrower to make a lump sum, cure payment. Mortgage modification applications are highly structured and lenders typically will not render any decision without a package that is 100% complete with current versions of all documents requested. While many borrowers attempt to modify their mortgage without the assistance of a lawyer, an attorney who practices in the area can be very effective.
Many courts, including the United States Bankruptcy Court for the Western District of Pennsylvania, sponsor their own loss mitigation programs. Court sponsored programs have the advantage of a judge with the power to compel mortgagees to designate a single point of contact and to come to a timely decision when the modification application is completed.
A chapter 13 bankruptcy case is also a highly effective way to preserve an at-risk interest in real property. Unlike chapter 7 bankruptcy, bankruptcy under chapter 13 of the United States Bankruptcy Code allows debtors with a regular source of income to repay their creditors some or all of what they are owed over a period of three to five years. For debtors who have reasonable mortgage terms but who have fallen behind on their mortgage obligation and just need some time and space to catch up, a chapter 13 filing may be the answer. When a debtor needs both time and better mortgage terms, a chapter 13 case, together with participation in a loss mitigation program might represent that debtor’s best opportunity to save their home and get a fresh start.
Behind on a mortgage obligation? Don’t wait until your lender forecloses on you—get a free consultation with an experienced bankruptcy lawyer today.
Robleto Law, PLLC
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