How can Chapter 7 reduce my mortgage payments?

In chapter 7, mortgage payments can be reduced if you know how to use the bankruptcy proceeding to your advantage. Remember that chapter 7's main purpose is for you to clean your slate and start fresh. Unsecured debts, like credit card debts, are discharged. With a home mortgage, the process is slightly different since the debt is considered secured. The bank has a lien on the property giving it the right to foreclose on the property if the debt is not affirmed. Bankruptcy will not discharge the debt but it can lessen mortgage payments.

If you want to keep your home, you need to affirm the debt. Affirming a debt is agreeing to keep the home and continue paying the mortgage once you are out of bankruptcy. However, before you affirm the debt ask your lawyer to negotiate with the bank for lower mortgage fees. The bank would rather get your money, even if reduced, rather than take your house and spend time and effort selling it. You can include provisions in your plan of reorganization or liquidation how you would pay the mortgage and how much are you asking as discount from the bank. Get the plan approved by the bank so that there will be no objections when it is filed in court. Your bankruptcy lawyer will have experience negotiating with this type of situations so let him handle this part of the process. Banks can be difficult to negotiate with but your lawyer will know what to do. In choosing a lawyer, get one that is an expert in bankruptcy and real estate law.