Chapter 13 bankruptcy may be used as an effective means of preventing foreclosure, allowing you to keep ownership of your home while repaying mortgage arrears over time. However, the mortgage remains in force, so you will be required to continue making mortgage payments going forward. This can be a difficult burden for a person trying to get back on a solid financial footing. One way to get help is to negotiate with your lender for a modified mortgage with more manageable terms.
A mortgage modification can allow for a decreased interest rate, an extension of the repayment period or both. In either event, your monthly payments will be reduced.
There are benefits to filing for Chapter 13 before seeking a mortgage modification. The filing will trigger an automatic stay that prevents your lender from taking additional debt collection measures and from initiating foreclosure. This temporary reprieve from debt collection may give you enough time to undertake a thorough assessment of your debts and obligations and determine the feasibility of holding onto your house.
In addition, the lender may see an advantage in putting a workable mortgage into effect rather than having to risk nonpayment of the full amount of existing arrears. If past-due mortgage debts included in the repayment plan remain at the time you complete the three-year or five-year Chapter 13 repayment plan, those debts may be discharged.
Any mortgage modification offered by the lender must be approved by a bankruptcy judge. Reducing or eliminating mortgage arrears will affect the terms of the Chapter 13 plan, which governs repayment of credit card, medical and other unsecured debts. People whose primary debt burdens are mortgage-related may find that they are able to drop their bankruptcy case after negotiating a mortgage modification.
It is also possible to obtain a mortgage loan modification without filing for Chapter 13. Another option for a foreclosure defense strategy is surrendering your home voluntarily to the mortgage lender via a deed in lieu of foreclosure. This option is advisable only if you are willing to give up your house but do not want to file for bankruptcy or foreclosure.
Atlanta-area homeowners can find bankruptcy and debt relief assistance at the law firm of Jeff Field & Associates. With offices in Scottdale, Marietta, Douglasville, Gainesville, Lawrenceville and Athens, we handle Chapter 13 cases filed with the U.S. Bankruptcy Courts of the Northern District of Georgia. To schedule a free initial consultation with one of our lawyers, call 404-381-1278 or contact us online.
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