The Problem of Mortgage Arrears
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Chapter 13 bankruptcy can provide an alternative to demands by a mortgage lender for the lump-sum payment of arrears. Almost 5 years after the start of the credit crisis that spawned the “great recession,” housing continues to be one of the biggest problems faced by the American consumer.
Families across the country, who find themselves behind on their mortgage, are often faced with a difficult decision: walk away from the home and allow foreclosure to proceed or borrow money to cure mortgage arrears and late fees that have been mounting for quite some time.
In many cases, maintaining what was once a normal monthly mortgage payment is a possibility, however, coming up with a lump sum payment to come current on the mortgage is simply not possible.
In these situations, chapter 13 bankruptcy can provide relief and help families stay in their homes who otherwise could not afford to do so. Filing for Chapter 13 bankruptcy forces mortgage lenders to accept arrears in small increments over the life of a chapter 13 plan, which usually lasts between 3 to 5 years. Rather than being forced to pay a lump sum as demanded by the bank, the Chapter 13 debtor has the option of adding a small percentage of the arrears onto their normal monthly mortgage payment and keeping their home through the process. While the chapter 13 case is pending, the bank is prohibited from foreclosing as long as the homeowner remains current on the normally scheduled mortgage payments.
The ability to pay back arrears over a manageable period of time is one of the primary advantages to filing for Chapter 13 bankruptcy.
ABOUT THE AUTHOR: John O'Connor
John O'Connor is a consumer class-action attorney and president of the National Bankruptcy Forum, a website devoted to providing the public with information about bankruptcy and debt.
Copyright The O'Connor Law Firm, PLLC
More information about The O'Connor Law Firm, PLLC
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
In many cases, maintaining what was once a normal monthly mortgage payment is a possibility, however, coming up with a lump sum payment to come current on the mortgage is simply not possible.
In these situations, chapter 13 bankruptcy can provide relief and help families stay in their homes who otherwise could not afford to do so. Filing for Chapter 13 bankruptcy forces mortgage lenders to accept arrears in small increments over the life of a chapter 13 plan, which usually lasts between 3 to 5 years. Rather than being forced to pay a lump sum as demanded by the bank, the Chapter 13 debtor has the option of adding a small percentage of the arrears onto their normal monthly mortgage payment and keeping their home through the process. While the chapter 13 case is pending, the bank is prohibited from foreclosing as long as the homeowner remains current on the normally scheduled mortgage payments.
The ability to pay back arrears over a manageable period of time is one of the primary advantages to filing for Chapter 13 bankruptcy.
ABOUT THE AUTHOR: John O'Connor
John O'Connor is a consumer class-action attorney and president of the National Bankruptcy Forum, a website devoted to providing the public with information about bankruptcy and debt.
Copyright The O'Connor Law Firm, PLLC
More information about The O'Connor Law Firm, PLLC
View all articles published by The O'Connor Law Firm, PLLC
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
