Bankruptcy and Mortgage Problems

28 Aug Bankruptcy and Mortgage Problems

The mortgage industry has insisted they could fix the mortgage problem.  Then they convinced congress that they can fix the mortgage problem.  Then the mortgage industry  convinced congress that giving the Bankruptcy Judges the ability to modify first mortgages was unnecessary.  Its been several months since this was a hot issue.  It has now  faded away from the public view.  Yet the problem persists.  Mortgages are being modified but a slow rate.  This week the NY Times reports  that OPTION ARM PROBLEM IS ABOUT TO EXPLODE.  Option ARMs defaults are expanding and there are over 600000 of them ready to reset with the next four years.

Option Arm mortgages allowed individuals to set their repayment plan.  They could pay principal and interest, or  interest only or worse yet  make a minimum payment which continues to cause the principal to increase.  The loan reset in 5 years or whenever the principal balance rose to a certain cap. This loans are now coming due.  They tend to be on bigger mortgages and bigger houses.

People facing these resets should contact a bankruptcy lawyer to see what their options are.  The principal balance may have risen to the point where second or third mortgages can be stripped off the property.  The loan balance maybe be completely due, thus allowing the loan to be modified in a Chapter 13 bankruptcy. If the loan can be modified the interest rate can be lowered.  Some bankruptcy courts are allowing repayment plans that include a refinancing option before the case is over. The bankruptcy lawyer maybe help to help you negotiate a loan modification.  These and other options may not help everyone but they may help some people.

It is important to review all of your options when facing a mortgage or financial crisis.  Bankruptcy may be the way to fix your situation.  Bankruptcy may not be the option.  Bankruptcy combined with other options may work best in your situation.  However it is very important to see how bankruptcy can work in a particular situation.  The earlier you review all the options the more effective the options can be.  The earlier you meet with a bankruptcy lawyer the better your chances are in getting some help.

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