Ok, another reprint.  But a lot of people are trying to save their homes and don’t know that Chapter 13 Bankruptcy offers homeowners a lot of options to save their home and actually reduce the amount owed on their mortgages.  For example; if you have fallen behind on your mortgage payments, Chapter 13 Bankruptcy will allow you to resume your normal monthly payments while setting up a repayment plan to repay your arrears (past due payment), over the course of five years. However, what if your property is worth less than what you owe? There are two situations that that bankruptcy may be able to help you avoid the unsecured portion of your mortgage.

Your Primary Residence
In the case of your primary residence, it is possible to completely avoid your second mortgage. Massachusetts bankruptcy courts have held that if you have a second mortgage on your property and it is completely unsecured, then you can avoid the second mortgage and convert it to unsecured debt. Here is how it works: Assume that you have a 1st mortgage for $350,000 and a second mortgage for $50,000. If your home value has dropped below $350,000, then your second mortgage is “wholly unsecured.” Using the Bankruptcy Court’s equitable powers, we can “strip” the second mortgage and make it an unsecured debt. Then at the end of your plan repayment, the remaining balance of your second mortgage will be discharged, leaving only your first mortgage on your property.

Investment Property
In the case of investment property, if your mortgage is more than the property is worth, the bankruptcy code allows you to “strip” the unsecured portion of the loan. Unfortunately, this option is not available if the property is your primary residence.

The current bankruptcy laws can’t help everyone, but there may be options available. To find out more, feel free to contact us for a free consultation. The attorneys at Grantham Cencarik, PC aren’t new to bankruptcy, we have been helping clients in the areas of Bankruptcy for years, call us today for your appointment.

After talking to my client, he disclosed that he fell behind on his mortgage payments he contacted his mortgage company when he fell behind 3 payments and asked for a loan modification. His lender told him not to make any payments, because they would not accept them. This went on for 12 months. So, in our clients mind, he was only 3 months behind on his mortgage payments, although he did not make a payment for 15 months….ouch. So, now it looks like the amount of the arrears is so large that it cannot be repaid through a Chapter 13 Bankruptcy plan. This means that I may not be able to save his house.

So, this leads me to my point. If you are having problems with your mortgage, don’t delay; talk to a bankruptcy attorney as soon as possible. Keep making your mortgage payments, even if you are behind. If your lender returns the payment, deposit it into a savings account…do not spend it. Then, pick up the telephone and call a bankruptcy lawyer. A good lawyer will tell you if you are a good candidate for bankruptcy or if there are other options available to you.

Next, do not think that your mortgage lender will look out for your best interest. Remember, your mortgage company is in business for one purpose; to make money for its shareholders. No matter how bad your situation, (family death, illness, etc.) your creditors are only concerned about making money. Maybe the government will come through and bail you out; but don’t count on it. Ultimately, you are the only person who has to power to control your future. Don’t be afraid to use all the tools you have available.

The “Investors First/Customers Last” Approach

Another barrier to loan modification is the pressure placed on mortgage servicers by their investors. In many instances, hundreds of mortgages are “pooled” or packaged together as a securities and sold to a group on investors. Sometimes there are hundreds of investors in these “pooled” securities. Not only is it difficult to get all the investor’s consent for a loan modification; but, there is no incentive for these investors to grant consent to modify any mortgages that are part of their pool. These investors are not required to, and there is nothing to compel them to consent to any loan modification. Many servicing agreements between investors and mortgage servicers restrict and prohibit the mortgage loan servicers from modifying the material parts of any loan, such as the interest rate, repayment terms, or monthly payments. This results in you, the homeowner, waiting months and months for approval your loan modification that is probably never going to come.

Bankruptcy Court Intervention: A Guaranteed Solution

So, what is a homeowner to do? A Chapter 13 Bankruptcy can help homeowners prevent the foreclosure of their home, and provide a plan for the repayment of all past due mortgage and escrow payments. A Chapter 13 Bankruptcy cannot modify the terms of your first mortgage, and, in many instances, the success of a Chapter 13 case depends on the willingness of the mortgage lender to modify a mortgage and reduce monthly payments. In limited cases, a Chapter 13 bankruptcy can avoid and eventually discharge a second mortgage. This action can be taken immediately in a Chapter 13 case, which can reduce your total monthly mortgage payment by the amount of your second mortgage. This relief applies in limited circumstances and it is important that you consult with an experienced Massachusetts bankruptcy attorney at Grantham Cencarik, P.C. to determine whether you qualify.

The First Step: Call Us – (617)497-7140

In the mean time; if you receive a letter from your lender concerning foreclosure; call us immediately; because the longer you wait, the more likely you are to lose your home. Also avoid talking to anyone who claims that they can save your home without filing bankruptcy, chances are, it is one of the many predators out there who try to steal the equity in your home, or who take money from you. If you are approached by one of these people, tell them you want to have your lawyer review their offer first, then call us for a free consultation.