Does filing chapter 7 bankruptcy reduce mortgage payments?

There are a lot of things that you can benefit from in a bankruptcy and mortgages are one of the problems which you can address. When you file for a Chapter 7 bankruptcy, you will be able to enter into a negotiation with your lender to enable you to hold on to your home by reducing your mortgage payments in a process called mortgage modification. In a mortgage modification, the lender will lower the interest rate which is applicable to your mortgage, the principal may also be decreased, and the payment period for the loan may be extended. During a mortgage modification, the borrower makes direct, monthly payments to the lender. In the event that you default on your mortgage obligations, the corresponding lender may seek relief from the automatic stay which is triggered by the bankruptcy process. When the lender is afforded this by the court, foreclosure proceedings may be commenced against you.

Prior to deciding about filing for bankruptcy, it is best to consult your lawyer so that you can study all of your options. Other means of reducing mortgage payments outside of bankruptcy are debt settlement for unsecured debts, deed in lieu of foreclosure, short sale, selling your property, forbearance, re-financing and reinstating your loan. Among all these, though, mortgage modification is the best option. Together with your lawyer, it is best to negotiate with your lender, and find out what systems they have in place so that your mortgage payments may be reduced. You may even qualify for a government program called HAMP.