Bankruptcy, Mortgages, and Miracles

Bankruptcy does not put new money on the table.  It can force a mortgage lender to accept a five year repayment plan covering missed payments and foreclosure attorney fees, but you must make all new mortgage payments as well.

Severe financial events can happen over the five year duration:  Illness, disease, unemployment, or accidental injury.  Even a pregnancy can have severe financial consequences.

Unfortunately, sometimes a home just cannot be saved.  The money may not be there.  Often you can rent a palace for the same amount you are paying for your home (and let’s not forget maintenance and repair costs) while you save up for a new down payment.  You will qualifiy for a new mortgage two years after a bankruptcy case if you then have a high enough income, and you will have saved a real down payment to make the interest rate affordable.  Your attorney can help you achieve a realistic expectation, including a possible Chapter 7 bankruptcy case which allows you to surrender a home and walk away from any mortgage deficiency after foreclosure.  You can also discuss conversion with your attorney, where you may have started a Chapter 13 case but it becomes unaffordable during the plan’s duration.

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