Mortgage and Bankruptcy: Save Your Home!

11 Oct Mortgage and Bankruptcy: Save Your Home!

If you are behind in the mortgage payment on your home, there are several things you can do. One way to stop a foreclosure is to file bankruptcy. Once filed, there is an automatic stay that goes into effect that keeps anyone from taking your property, including your home.

In a chapter 7 bankruptcy, however, the first thing the mortgage company is going to do is to file a motion for relief from the automatic stay so that they can continue the foreclosure. This is usually granted by the court if you aren’t making your house payments.

On the other hand, in a chapter 13 bankruptcy, the law gives you a right to stop the foreclosure altogether so long as your plan payments can catch up on what is owed the mortgage company. This is often easier than it sounds. Without the help of the bankruptcy you would have to come up with the total amount that is in arrears right away. That will be the sum of all of the missed payments and can be a daunting amount.

In a Chapter 13 however, you have up to five years to cure the amount you are behind. So, even a sum as large as $10,000 can be paid at $200 or so (including the administrative costs) a month. Not so scary!

Meanwhile, you can look for a modification program to totally restructure your home loan to something you can afford. There are Federal programs to do this, and most mortgage companies will work with you towards that end.

Unfortunately, the ultimate decision lies with the mortgage company. There is no judge or government agent that can force a modification. Nonetheless, it does happen, and you will be able to modify your mortgage payments while in the Chapter 13 plan.

Keep your attorney apprised of the situation so she can make whatever changes are necessary in your bankruptcy plan.

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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