If you are facing foreclosure and feel that you are coming to the end of the road, do not lose hope –bankruptcy may help. Chapter 13 bankruptcy was designed to help homeowners catch up on payments and potentially keep their homes.
Immediately upon filing bankruptcy, a protection referred to as the Automatic Stay takes effect, essentially placing bankruptcy debtors in a bubble, free of harassment from creditors and collection efforts. The Automatic Stay also serves to cancel pending legal actions, including foreclosure sale dates. This is a temporary protection, which provides homeowners breathing room to calmly deal with different options available to them to try to keep their home, such as by trying to modify their mortgage loan or catch up on past due payments.
One of the two most common options within Chapter 13 bankruptcy for saving one’s home is the MMM (Mortgage Modification Mediation) program. A neutral third party is selected to facilitate the communications between homeowners and lenders. When participating in the MMM program, certain rules need to be followed, which is good for borrowers. All participants must use an approved secure online portal for the submission of documents and communication. The portal stores the documents submitted and received and tracks the date and time of submission. Upon submission of the documents, the borrower is entitled to two, one-hour mediation sessions, which allow the parties to discuss various programs the borrower will be considered for and if the borrower does not qualify, explain the reason for the request being denied. There are no guarantees that a borrower will be approved for a modification under MMM, but, as opposed to attempting to do it on your own, it is a program which guarantees that the modification request will be reviewed by the lender.
The other option is to “cure and maintain.” Chapter 13 bankruptcy is essentially a reorganization of debts lasting typically 3 or 5 years, in which debtors make monthly payments to the bankruptcy trustee, which the trustee then disburses to creditors according to the payment plan debtors propose. For purposes of keeping one’s home when behind on payments (absent a modification), these monthly payments serve as a payment plan to catch up on the missed mortgage payments over the life of the bankruptcy and the regular mortgage payment going forward. By the end of the bankruptcy case, upon completion of the payments, borrowers will be caught up on the mortgage and will have avoided foreclosure.
In addition to these two common options, if a homeowner in bankruptcy has more than one mortgage against the home, chapter 13 bankruptcy may also potentially eliminate the second mortgage or reduce it to the amount of equity in the property after the first mortgage. For example, if the first mortgage is higher than the value of the home, the second mortgage may potentially be eliminated altogether. If, on the other hand, the first mortgage is lower than the value of the home, however, the equity in the home after the first mortgage is taken into account is still lower than the amount of the second mortgage, chapter 13 bankruptcy may potentially reduce the second mortgage to the amount of that equity. With either of these two options, once the bankruptcy is completed and a discharge is issued, the second mortgage would be satisfied.
There are various options available. It is important that you call a bankruptcy attorney to see if you qualify for Chapter 13 bankruptcy, if bankruptcy is the best option for you, and to help you take advantage of all the relief that may be available to you.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 1,500 homes from foreclosure, eliminated $1,000,000 in mortgage principal and consumer debt, and have collected millions of dollars on behalf of our clients due to bank, loan servicer, and debt collector violations, negligence and fraud. Contact us for a free consultation to see how we may be able to help you.