Bankruptcy and your Home
It is not news to anyone that many Americans are struggling to afford their homes and avoid foreclosure. Oftentimes, people in this position seek out advice on saving their homes in the context of a bankruptcy filing. Unfortunately, the bankruptcy laws do not give attorneys very many viable options to help homeowners who are struggling with their house payments.
In a Chapter 7 bankruptcy (where all of your debt is forgiven), there are no tools that can be utilized to catch a homeowner up on his or her payments, nor to make the payment more affordable. That’s not to say a bankruptcy cannot do any good for an individual who is struggling with her mortgage payments. By ridding an individual of all of her unsecured consumer debt (credit cards, personal loans, and medical bills) she may be more able to afford her mortgage payment because she is no longer making payments on her unsecured debts every month.
In a Chapter 13 (where the individual is on a payment plan for 36-60 months and pays back a portion of his or her debts), a homeowner can catch up on missed mortgage payments; however, this is easier said then done. Once a homeowner files for Chapter 13 bankruptcy, they will not only have to pay the agreed upon Chapter 13 payment, but they will also have to resume making the regular monthly mortgage payment as obligated under the mortgage contract. This is feasible for some homeowners, but for many it is not, which is why they fell behind on their mortgage payments in the first place. If the individuals circumstances have changed since she first fell behind, she has since found employment, for example, then a Chapter 13 may be a good way to get back on track with the mortgage, as well as provide relief with respect to any other debts she accrued while she was out of work.
Usually, the best way for most people to remain in their homes is to work with their mortgage company directly and/or through the Home Affordability Modification Program (“HAMP”). The government’s website on this program can be found here:
Some mortgage companies also have other programs for homeowners who do not qualify for HAMP. Regardless of the process, lawyers hear from client after client about how frustrating it is to try to work with one’s mortgage company on a modification. Here are some of the things we hear most often from people that are trying to modify their mortgage:
“Every time I call, they tell me I need another piece of information that I’ve already sent in.”
“I called back when they told me to in order to check on the status of my modification and they told me they lost everything I sent.”
“They told me they never got the information I sent them.”
“They told me I didn’t need a modification because my income is too high.”
“They told me I didn’t qualify for a modification because I wouldn’t even be able to afford the new payments.”
“They told me they need more updated information.”
We have had clients who have been able to successfully modify their mortgage, sometimes as a direct result of their bankruptcy filing because the mortgage company feels the individual will now be better able to afford her payment because she does not have to pay on other debts. However, there have been far more who have either given up or been beaten by the clock and lost their home to foreclosure. Regardless of where you are in the modification process, whether it’s on-going or coming to an end, I strongly encourage you to write your elected representatives about your experience with the modification programs. Use your voice to make a change and to help make the HAMP program more effective for those it was meant to benefit.
Keep in mind, that a modification can be done in conjunction with, prior to, or after a bankruptcy filing. If you need debt relief over and above just your mortgage debt, bankruptcy can be a good option. Many people have the misconception that they will lose their house in bankruptcy. This happens only in extreme and unusual situations. Always get legal advice as it pertains to your particular situation. You may be missing out on the serious benefits and relief provided by a bankruptcy because of misinformation.
For the client-focused and individualized attention your bankruptcy case merits, turn to Lamey Law Firm P.A.