Chapter 13 as a last resort to stop foreclosure

     Until 2009, if a client came into our office and was behind on his or her mortgage, the only real solution was Chapter 13.  The homeowner could resume making mortgage payments directly to the lender the month after the bankruptcy was filed and catch up on the mortgage arrears over a period of three to five years. There was pretty much nothing that we could do to lower interest rates or mortgage payment unless the bank was willing to work something out with the borrower.

     Now, the landscape is very different. The homeowner who is behind on a mortgage by even a few months can seek a loan modification and, very often, reduce the monthly payment and interest rate. It is not easy to accomplish, and there are definitely a lot of con artists (regrettably, even some attorneys) promising results that cannot be delivered. However, in the right case, the homeowner will be approved for a loan modification and can avoid chapter 13 altogether — or perhaps file chapter 7 instead to deal with non-mortgage debt.

     I am amazed that chapter 13 lawyers are still filing bankruptcy cases for clients with obviously terrible mortgages.  The better way to approach the situation is to have the mortgage reviewed by a qualified mortgage modification attorney first. If the mortgage cannot be modified, then chapter 13 may be appropriate but only as a last resort. 

      Homeowners should be made aware that even if they are in an active chapter 13 case or an active foreclosure, they can still be reviewed for both HAMP and traditional mortgage modifications. It is almost never too late for such a review, and we accept referrals from attorneys throughout Western New York of clients that are interested in pursuing loan modification options.

This entry was posted in Bankruptcy and tagged , , . Bookmark the permalink.

2 Responses to Chapter 13 as a last resort to stop foreclosure

  1. Denise Brown says:

    I need help for I do not lose my home because of back taxes I no longer have a mortgage on the property and I do not want to lose it, It is on the list for the upcoming tax sale property foreclosure, Thank you and I look forward to hearing from you soon.

    • Peter says:

      A Chapter 13 petition automatically stops the auction. The City has never opposed last-minute bankruptcy filings, even those filed a day before the auction. In chapter 13, you will have five years to get caught up on all real estate debts, including city taxes, county taxes, water bills, and user fees. If you need just a short term payment arrangement, you can petition the Court for an order to remove the property from foreclosure.

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>