Chapter 13 bankruptcy is still a real and viable way to save your home. At this time the bankruptcy courts do not have the legal authority to do a loan modification for your primary residence. However that is not the case for second mortgages, third mortgages or equity lines of credit. I am not talking about a loan modification. I am talking about removing those loans altogether.
If the value of your home does not support any of the value of the lien on your property from any mortgages after the first, then the lien can be stripped or removed from the real estate. This option is only available in a chapter 13 bankruptcy setting. The balance of the loan is then treated as a general unsecured debt.
If this is the case for your property, in addition to the chapter 13 case, you need to file a separate adversary proceeding in the bankruptcy court to remove the liens which are no longer collateralized by the value of your real estate. It is a lot more work and adds attorney fees and costs to the chapter 13 case, but is getting rid of one or more mortgages worth that investment? Elimination of a whole loan. I call that loan modification.
The associated press reports that more than one million Americans are likely to lose their homes to foreclosure this year. This number represents the number of home expected to actually be sold at sheriff sale, not new cases filed. In the first six months of this year almost 528,000 homes were lost. The real impact is that this number is more than 100,000 above 2009. Banks expect that to just deal with the current load of properties with delinquent mortgages it will take well into 2013.
To put this information in perspective, in a normal year 100,000 homes are sold at foreclosure. TARP and the other bank bailouts are sure helping homeowners aren’t they? Loan modification? There’s another joke. How many times have you faxed the same information only to be told that they never received it, and to fax it again?
If you qualify, a chapter 13 bankruptcy is the better way to go. The bankruptcy court decides, you make the plan payments, complete the plan, and that’s it.
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