HOW BANKRUPTCY HELPS SAVE YOUR HOME
Bankruptcy, although the big bad word when it comes to finances, can and does help people every day. One very big way it can help is by potentially allowing someone to keep their home.
In today’s world, people are finding themselves falling behind on mortgage payments for any number of reasons. Foreclosure is started leaving the owners with having to come up with large amounts of money to catch up the arrears on their home, in order to keep it, which one does not have. The owner then attempts other ways to try to save the home including trying to qualify for a loan modification or refinance of the property. However, this does not always work, leaving the owner in a tough spot. This is where bankruptcy can help.
In a chapter 13 bankruptcy, one creates a plan payment. The plan typically last for 60 months. How the plan helps is it takes your arrears and spreads the amount over the 60 months of the plan. An added bonus, the bankruptcy stops ongoing interest or penalties on the arrears from accruing.
Something that is important to understand about this though is that the owner must keep the house mortgage payment current during this time period. The first question one would need to ask then: can I continue to make the current payment on time? The bankruptcy will not change the interest rate or the monthly payment or any other terms, with a few exceptions, it will simply allow you a way to catch your payment up over 60 months.
For example, your current payment is $1,500.00 per month and you are behind $6,000.00. Under the plan your payment would be $1,600.00 per month ($1,500.00 for the ongoing and $100.00 for the arrears). By the end of the 60 months you have kept your ongoing payment current and caught up on the arrears.
Now, it is not always clear cut as this example provides. Other factors come into play in figuring your plan payment as well, such as income, court cost, fees, and other debts. Regardless, it may be worth your time to talk with a bankruptcy attorney if you are facing a foreclosure to see if bankruptcy can help. This avenue may just allow you to keep your home.