One concern that many people have about whether to file bankruptcy is being sure they will be able to keep their home. Basically, two items are considered when evaluating a person’s home. The first is putting a value on the house. This can easily be done by obtaining a real estate appraisal or market analysis or simply by comparing your home to similar homes in your neighborhood. What is looked at is the equity in the property. Equity is the difference in the value of the property and what is still owed on the property. Items such as mortgages, real estate taxes, federal taxes and judgment liens are subtracted from the value of the property to arrive at the equity. This amount is considered the asset that becomes a part of the Bankruptcy Estate and is what must be protected. The Bankruptcy Code provides you with a choice of exemptions for this purpose. Here you would choose the exemption to protect your interest in a residence, which most often is generous enough that your property would be fully protected. The second item that is taken into consideration is whether you are current on your mortgage.
Chapter 7 May Be Your Best Option If You You Are Current On Your Mortgage
If you are in fact current on your mortgage payments and your home is fully exempt, then Chapter 7 Bankruptcy would be the better option for you. There may be times when you feel that the overall mortgage or other secured debts are just too much to handle and that you would like to simply get out from under the debt. In that situation, you can surrender the house and get a frsh start that will put you on the road to financial recovery. Again, your best choice would be to file Chapter 7 Bankruptcy. Your mortgage company will eventually start mortgage foreclosure proceedings, but you can continue to live in the house rent free until the foreclosure takes place, which can possibly take upt to five months or longer.
Chapter 13 May Be Your Best Option If You Have Excess Equity In Your Property Or Are Delinquent On Your Mortgage
Should the equity in your home be more than the amount allowed for the exemptions, then it will be necessary to file Chapter 13 Bankruptcy. You will be required to pay unsecured creditors at least the value of the equity that you were unable to exempt. If you are delinquent on your mortgage payments, then Chapter 13 provides you with the opportunity to make up the payments over a three to five year period. The good news is that generally you will not be required to pay interest on those mortgage arrears. In addition to paying the mortgage arrears, ongoing mortgage payments are to continue. The idea is that at the end of the three to five year period, the mortgage will be current and the lender will no longer be in a position to foreclose. You will then continue to make your mortgage payments on your own. If you know that your mortgage is delinquent and it is only a matter of time until the mortgage company forecloses, then you might want to consider filing Chapter 13 Bankruptcy sooner rather than later. Any time a mortgage company starts the foreclosure process, it contracts the legal work out to a law firm. The amount that the lender has paid the law firm is tacked onto your claim. Filing before your loan is placed in foreclosure may save you anywhere from $3,000.00 or more.
One of the Greatest Benefits of a Chapter 13 is the Cram Down
One type of action that can be very beneficial in restructing the debt on your home is the cram down or what is also known as a strip off. A Chapter 13 Bankruptcy does not allow you to modify a security interest in real property that is your residence. Simply put, you cannot modify your mortgage even if the amount you owe is far greater than the value of the property. In cases where there are additional security interests, such as a second or third mortgage, then Chapter 13 may provide you with more flexibility. When the value of your home is worth no more than the first mortgage, then Chapter 13 allows you to eliminate any second mortgage or other security interest. This security interest is now treated like any other unsecured creditor. If you are paying unsecured creditors nothing or very little in your Chapter 13 Plan, then just the same you will be paying this creditor nothing or very little.
Long-term Debts Should Continue To Be Paid Even Upon the Completion of Your Chapter 13
There are long term debts, which are debts that you will need to continue paying, such as your mortgage, upon the completion of your Chapter 13. The second mortgage and any other security interest that you may have crammed down or stripped off are elimated forever, as long as you complete your Chapter 13 during the three to five year period.
Other Type of Situations To Be Considered In Deciding Whether To File a Chapter 13
Most Chapter 13s that focus on a person’s home are due primarily to the existence of a mortgage delinquency. There are other types of situations that you can use a Chapter 13 for to save your home. You may have a balloon payment on your mortgage that has already fallen due or will fall due shortly. Chapter 13 allows you to pay off this amount even though the time period of when the balloon payment was due has expired. Earlier, it was stated that you cannot modify a first mortgage. There is also an exception even in this instance. If the loan that secures your home is also secured by other property, then that prohibition does not apply and you can modify your mortgage. The above mentioned secured debts must be paid in full over the three to five years in your Chapter 13.
Sometimes a person does not actually own their home yet, but upon the completion of payments through a land installment contract they will receive a deed. If you find yourself in that situation and are delinquent on your payments, then Chapter 13 will allow you to hold on to your home and cure the deficiency.
Loss Mitigation Or Better Known As Obtaining a Loan Modification
Due to the recent economic difficulties over the past few years, a person who files bankruptcy can now seek a mortgage modification through the Bankruptcy Court in an effort to obtain a fresh start. The Loss Mitigation Program was established as a mediation tool to bring the debtor and mortgage company together in hopes of reaching an agreement. Depending on a calculation of your income compared to expenses, it might be possible to lower your monthly mortgage payment and place your mortgage arrears at the back of the loan.
Attorney Rodney Shepherd Can Help You Save Your Home
If you find yourself in danger of losing your home, then filing bankruptcy may be a great way to readjust your mortgage delinquency and reap many other benefits. Pittsburgh Bankruptcy Attorney Rodney Shepherd provides a free consultation and his many years of experience will help you in deciding the best approach for you. Call today for an appointment at 412-471-9670 or complete our online content information form.