Can Bankruptcy Reduce Your House Payments?

Home Mortgage

Preventing Home Foreclosure

A previous post discussed some of the general aspects of a Chapter 13 Bankruptcy plan. For homeowners who are delinquent on their mortgages, the amount to be repaid may be substantially lower than the amount the moneylender claims that you owe.

Reasonableness

Most mortgage companies are upfront and evenhanded when dealing with their customers. However, it is not uncommon for mortgage companies to charge some outlandish fees, such as:

  • Processing fees
  • Underwriting fee
  • Excessive application fees
  • Property inspection fees

Be on the lookout for such fees, and question them if they pop up. An attorney may also be able to argue that such fees are not reasonably related to the mortgage transaction, and have these fees stricken from the delinquency amount.

Avoiding the lien

Ask your attorney about some lien-reduction options that may be available. In some jurisdictions, you might file a motion to avoid the lien and dramatically reduce the past-due amount:

  • Cram-down: In some cases, you may be able to repay the current Fair Market Value of an item as opposed to the contract price. For example, if you bought a house for $100,000 but it is now only worth $80,000, you may be able to cram down the mortgage $20,000.
  • Strip-off: If there are multiple liens on a house and the FMV is too low to secure both lies, the junior lien may be subject to removal. Many people who bought real estate with an 80/20 financing package may be in this situation.
  • Statute of limitations: A Texas court has held that if a lender sends an acceleration notice but fails to foreclose within the proper time period, the lender has forfeited its right to foreclose on the note.

A Chapter 13 bankruptcy is nearly always voluntary, meaning that you must file it yourself. To make an investment in a better financial future, contact our office in Melbourne, Florida for your free consultation.


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