behind on mortgageMany owners are still behind on mortgage payments, even though the real estate market is rebounding. And lenders continue the march toward foreclosure.

Three Ways Bankruptcy Might Be The Solution:


1.  Say “Goodbye” to that Underwater 2nd Mortgage.

Many property owners have a second mortgage on their property. It was frequently one of the ways to pull equity out without having to sell the property. These 2nd mortgages are also frequently called “Home Equity Lines of Credit” (aka “HELOCs”). If this 2nd mortgage is currently underwater – i.e. the value of your home is less than the amount owed on your 1st mortgage – then bankruptcy may allow you to remove (strip off) this 2nd mortgage from the property. And frequently, that second mortgage can then be discharged (wiped out) through your bankruptcy filing. When available, this “lien strip” can be incredibly valuable for property owners.  (Note: This option is available whether or not the owner is behind on mortgage payments).

2.  Five Years To Catch Up Missed Payments.

Are you 12, 24 or 36 months behind on mortgage payments? Ordinarily, it may be impossible to immediately catch up these missed payments. But that’s often what the bank demands. And as long as you are behind, you are at risk of foreclose. This can be particularly devastating if your property has equity.  But in a chapter 13, you can legally halt foreclosure, while you catch up missed payments over as long as five years. If you just needed more time to reinstate your mortgage, bankruptcy might be your most powerful tool.

3.  Court-Sponsored Mortgage Modification.

The Northern District of California Bankruptcy Courts offer a program called Mortgage Modification Mediation (“MMM” for short). This program creates a structured environment in which borrowers seek voluntary modification with their bank, while the bankruptcy halts any foreclosure. For those who are substantially behind on mortgage payments, this program may be invaluable.  The program provides structure to a process that is often quite frustrating for borrowers.  And if you qualify for a modification, the result may be reduced interest, a longer repayment period, or even principal forgiveness (i.e. the bank simply forgives a portion of your debt).  Consult with Local Bankruptcy Attorney. With some income and mortgage information, and that attorney should be able to advise you whether you are a likely candidate for the MMM program.  For supplemental information on this program, visit the Court Website.


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