How can bankruptcy save my house from foreclosure
There are three options, involving a chapter 13 case.
Option One (cure mortgage arrears)
Pay the total amount that the debtor is behind with their mortgage over a period of 36 to 60 months., in addition to making regular monthly mortgage payments. The debtor may be unable to make such payments. In other words, if a person is $40,000 behind with their mortgage payments, this will require a monthly trustee payment, not including costs and expenses, of about $666.00, plus future monthly mortgage payments. The debtor is able to keep his house and reinstate the mortgage, if he completes all required payments, that are due through the bankruptcy case and directly to the mortgage company.
Second option (pursue loan modification)
Requesting a loan modification through a chapter 13. Typically, the mortgage company will allow six months for the loan modification process. In this situation, the debtor is puttihg all of their eggs in one basket. If the mortgage company approves the loan modification, the debtor is able to save their house. Under this option, the debtor must make the regular monthly mortgage payments or possibly less, in addition to a monthly trustee payment. The trustee payment must be a reasonable payment based on the debtor’s disposable income and asset values. If the loan modification is denied, the debtor will, likely, be unable to save his house. A person may chose this alternative, solely, if he is unable to pursue both options.
Third option (pursue loan modification and cure mortgage arrears)
A person may pursue both options explained above. If the loan modification is denied, he may save his house by completing the required payments.
Please note that this is an extremely simplified explanation of these matters, which vary greatly based on different circumstances and finances.
Robert Manchel is a New Jersey bankruptcy attorney, who may be reached at (866) 503-5655.