One option for individuals that find themselves in the position of not being able to pay their creditors is to file for Chapter 13 bankruptcy. Mortgage payments that are in arrears can be included in the bankruptcy case and will allow the homeowner to catch up on their payments, maintain current payments and eventually own the home. Although most states allow the homeowner to keep a home, rental properties, vacation homes and even residences over a certain value may not be included in all exemptions.
Benefits of Bankruptcy for Delinquent Mortgages
Chapter 13 bankruptcy does have several benefits for homeowners to consider. It allows the homeowner to remain in the property without the risk of foreclosure. It is also a good option to start rebuilding and re-establishing a credit score. Since the payments will be scheduled to both catch up as well as stay current, the homeowner will emerge from the bankruptcy in a stronger financial position than allowing the property to be foreclosed on.
Considerations
With any debts included in the Chapter 13 bankruptcy a plan must be feasible to repay those debts. There are several options for how this repayment can be made including staggered payments or supplemental payments to cover the arrears. In addition the current mortgage payment must be made as per the terms of the contract. The homeowner will typically end up paying a higher amount over the terms of the bankruptcy to the mortgage company to balance out current and back payments.
It is also important for the homeowner to remember that all other expenses and requirements with regards to the home also have to be maintained and current. This includes home owners insurance, taxes, physical maintenance on the home as well as any other additional expenses such as Homeowners Association (HOA) fees.
Seeking Legal Support
Negotiating a Chapter 13 bankruptcy can be very challenging to do without the assistance of a qualified and experienced attorney. Planning your budget, realistically looking at your options as well as helping to negotiate payments with the mortgage company are all issues on which an attorney can provide sound, practical legal advice.
The attorney will help you understand your obligations through the bankruptcy repayment plan and answer any questions or concerns you may have during or after the bankruptcy is granted. Your attorney will also be there to help you file appeals and provide guidance should your bankruptcy case be denied.
