The only way to permanently stop a foreclosure is through Chapter 13 bankruptcy. A Chapter 7 bankruptcy may temporarily stop foreclosure but only for a month or two. A Denver bankruptcy attorney will carefully guide you through this complicated process. The complexity of a Chapter 7 bankruptcy pales in comparison to the enormous complexity of a Chapter 13 bankruptcy.
In Chapter 13 bankruptcy, at the risk of over-simplifying the complexities, allows you to pay your mortgage arrearages over a five year period. You must start making current and timely mortgage payments after the Chapter 13 bankruptcy is filed while still paying the arrearages over the life of the Chapter 13 bankruptcy reorganization plan.
To be successful, the Chapter 13 bankruptcy must be filed before the public trustee in your county conducts a sale of your property. After the sale, it is too late to save the property.
Besides paying the back payments to your mortgage company, other creditors are accomodated in your bankruptcy plan so you are able to afford your mortgage payments in the future and get back on track. For instance, general unsecured creditors (such as credit card lenders) may receive only a few pennies on the dollar. The balance of what is owed to unsecured creditors is written off in the Chapter 13 bankruptcy reorganization plan. The actual amount you must pay these creditors depends on many factors including but not limited to your income, expenses, and family size.
Mortgage stripping. In the current real estate market, many people may be able to keep their homes while eliminating their second mortgages entirely. This process is commonly called “lien stripping” and is available when the value of your house is less than what you owe on your first mortgage. In such cases, the second mortgage is wholly unsecured because there is no equity in the house to cover any portion of the second mortgage.
Permanent mortgage modifications virtually never happen. Don’t rely on empty promisses from your mortgage company. More on this from CNN Money (click here). Although it may sound cynical, your mortgage company may put a “temporary” modification in place in order to squeeze as much money out of you as possible until finally denying a permanent modification and foreclosing several months later.
The only realistic way to save your house when foreclosure has already been initiated is through Chapter 13 bankruptcy. Even if you don’t qualify to strip your second mortgage, mortgage arrearages can be paid over five years in a bankruptcy reorganization plan.
In summary, whether or not you can eliminate your second mortgage, a Chapter 13 bankruptcy will enable you to forget about all past due payments and start fresh making your regular monthly payment starting on the month after your case is filed. Contact us for an office visit and all the details.