Consumer Reorganization Through Chapter 13
If you are behind on your mortgage payments, filing a chapter 13 bankruptcy may help you avoid foreclosure. If you are behind on payments to the point where a foreclosure complaint has already been filed by your lender, filing a bankruptcy case will immediately halt it. The moment a bankruptcy case is filed, something called the automatic stay is put into effect. The automatic stay is a powerful provision of the Bankruptcy Code which prevents any creditor or party-in-interest from continuing litigation against you or depriving you of your property.
Chapter 13 bankruptcy also helps you repay your past due mortgage payments. Often, once you are several months behind on mortgage payments, you lender may refuse to accept any payment less than the total amount of the arrearages plus penalties and interest as payment, and consider the payment of a single mortgage payment a partial payment. This perpetuates the vicious cycle. A chapter 13 bankruptcy case allows you to pay off any arrearages over a three or five year time period – making catching up far more manageable. Often times, chapter 13 bankruptcy is the only practical option for those substantially behind on their mortgage payments.
There are other solutions for debtors with no other problematic and significant debt beyond mortgage arrearages. Mortgage modification, an arrangement to mitigate the lender’s loss and lower your monthly mortgage payments, can serve as a solution as well. Modification is a negotiation and loan restructuring process which back loads your mortgage arrearages and sometimes (though not always) lowers your monthly mortgage payment. This process often extends the term of your loan allowing your even greater advantages than might otherwise be available in a chapter 13 case limited to five years.
If you are behind on your mortgage payments and have mortgage arrearages in excess of what you can pay back, give us a call for a free consultation to discuss a solution based on your individual goals and problems with debt.