Using Chapter 7 and Chapter 13 bankruptcy to modify mortgages

New Yorkers who have some unsecured debt and are behind on their mortgage may be able to file for Chapter 7 bankruptcy targeted towards their unsecured debt. This will allow the individual to remove unsecured debt without otherwise affecting their mortgage loan. However, the individual or household will not necessarily be able to modify their mortgage loan on this basis, which means that they may need to figure out a way to catch up on any unpaid mortgage payments. One way that a person may be able to do this is by filing Chapter 13 bankruptcy directly after their Chapter 7 bankruptcy. Chapter 13 bankruptcy allows a person to enter into a structured payment plan to resolve any old debts. A household will not have remaining debt after filing Chapter 7 besides their mortgage payments, so the Chapter 13 bankruptcy will only affect the bank balance that they owe on their mortgage payments. However, this method does come with some risk. When using Chapter 13 bankruptcy to manage past mortgage payments, the homeowner will have to pay both the payment plan and their existing mortgage payments. If the homeowner was already having difficulty making their mortgage payments, then this plan… Continue reading

Chapter 13 and second mortgages

New York homeowners with more than one mortgage on their properties should be aware of of how bankruptcy laws may affect the foreclosure process. Even if a homeowner is current on a first mortgage, there could be a default under a second mortgage, and filing for bankruptcy won’t necessarily stop foreclosure by the junior lien holder. Filing for Chapter 13, however, can give a homeowner a fresh start under the right circumstances. When the amount of a homeowner’s first mortgage loan is greater than the value of the home, a Chapter 13 bankruptcy would eliminate all junior mortgages. If the property value is even a dollar more than what is owed on the first mortgage, however, any junior mortgages cannot be eliminated. . Many New York homeowners have taken out second mortgages with credit unions or similar smaller lending institutions. Credit unions often pay more attention to individual mortgages than do larger lending institutions. While a homeowner may wish to get an appraisal to determine whether the property’s value is less than the senior mortgage, a credit union will likely try to obtain an appraisal that is more favorable to its position. Falling behind on mortgage payments and the threat… Continue reading

Bankruptcy and home ownership

Some New York homeowners who are struggling to make ends meet or facing a foreclosure may choose to file for bankruptcy. The advantages of doing so are that people can reorganize their debt and, in some cases, even have unsecured debt discharged. With a Chapter 7 bankruptcy, unsecured debt such as credit card balances can be written off and people are not required to pay any additional money to creditors. However, if someone does not meet the requirements for a Chapter 7 filing, often due to making to much money, a Chapter 13 filing may still help debtors keep their homes under certain circumstances. A Chapter 13 bankruptcy generally allows debtors to renegotiate the way they pay off their obligations. They are assigned a court appointed trustee, and the trustee will work with the individual to set up a payment plan as well as accepting and distributing these funds to creditors on a monthly basis. While people are given a greater amount of time to pay off loans, they will need to make their current payments as well as putting money towards missed payments. This can become burdensome, even if the home has been refinanced. Debtors in this position may… Continue reading

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