Preventing Home Foreclosures through the Creative Tools of Bankruptcy
1) If you have fallen behind on your mortgage payments, Chapter 13 would require your mortgage company give you 3 to 5 years to catch up on the missed payments. Once you get even just a few payments behind on your home, it often becomes impossible to hang onto it. That's because the mortgage company usually will give you only a few months to catch up those payments, requiring many hundreds of extra dollars every month that you don't have. Chapter 13 stretches this repayment period to as long as five years, greatly reducing the monthly burden. And the mortgage company cannot say no.
2) If you could make your mortgage payments as long as you did not have to pay your other debts--such as credit cards and medical bills, a Chapter 7 bankruptcy would write off those other debts so that you could save your house. You may have the impossible task of choosing between paying either the house or other debts. The bankruptcy laws allow you to favor your house payment and your house mortgage over most other creditors. Although you may have very good reasons for wanting to avoid filing bankruptcy, you owe it to yourself to know your legal options. Bankruptcy may well allow you to preserve for you and your family what is most important.
3) If you could pay your first mortgage but don't have enough money to pay the second mortgage, too, sometimes Chapter 13 will allow you not to pay that second mortgage. If your house has declined in value so much that you have no equity beyond the first mortgage, we may be able to get rid of your second mortgage, forever. It all depends on the numbers, and on whether you are a candidate for Chapter 13.
4) If you live in a very inexpensive home worth less than the debt on it, such as a manufactured home, you may be able to greatly reduce both your monthly payments and even the entire balance on the debt. Although generally we cannot reduce the principal amount of your mortgage or the monthly payment, there is an exception for low-value homes in which the mortgage can be reduced to the value of the home, as long as that lower balance can be paid off in five years. That can save tens of thousands of dollars on such mortgages.
5) If you have a judgment against you, eating into the equity of your home, bankruptcy can often get rid of both the judgment lien against the home and the debt behind it. Again, this depends on the numbers--the value of your home and the balances on all the debts against it, but judgment liens can often be voided through either Chapter 7 or 13.
6) If you have a IRS or Oregon Department of Revenue tax lien on your home, or if you owe prior years' property taxes, Chapter 13 would prevent your home from being seized by these tax agencies. Chapter 13 provides a mechanism for favoring these creditors over most of your other creditors, while freezing these agencies' ability to hurt you or your property.
7) If your house is getting foreclosed and you are trying to sell it, including on a short sale, bankruptcy can give you more time to do so. Whether you need to buy just a few days or weeks to close a sale, or perhaps even a few years to sell an unusual property at a sensible price, a carefully planned and crafted bankruptcy filing can stop the foreclosure and get you the needed additional time.
Please call us, in Oregon at 503-253-7777 or in Washington at 360-882-7777 to see how these tools--and others--could help you keep your home. Or use the “CONTACT US” tab on this website to ask for a free consultation.