We are frequently contacted by desperate homeowners who are struggling to save their homes from a pending foreclosure sale. They may or may not have defended the foreclosure. Quite often, a sale date has already been set by the court by the time they call us. At this point, they wonder, is there anything they can do to salvage the situation? The answer is yes – bankruptcy can help you save that home. Here are a few possibilities:
Cure the mortgage in a Chapter 13
Chapter 13 bankruptcy provides a powerful weapon against foreclosure: the ability to “cure” the mortgage by paying the regular monthly payment plus a portion of the arrears over 36-60 months. After the plan is discharged, the debtor has effectively reinstated the mortgage and is once again in good standing with the mortgage lender.
Second mortgage cure or strip
Many people don’t realize that second and third mortgages (even Home Equity Lines of Credit) can be foreclosed the same way a first mortgage can. Here’s the good news: Just as first mortgages may be cured in a Chapter 13 bankruptcy, so too can second or third (or fourth or fifth!) mortgages be cured. Even better is the fact that you may be able to “strip” these mortgages off of the property if there is no equity in them. That means that you won’t have to cure them in the Chapter 13 if the home is worth less than the amount owed on the first mortgage.
HOA/COA cure or strip
The same rules apply for Homeowner’s Association and Condo Association liens. They can either be cured in a 60 month Chapter 13 repayment plan, or stripped and added to general unsecured debt if there is no equity in the liens.
Investment property “cramdown”
On investment property, even a first mortgage may be “crammed” down to the value of the property, to be paid with rental income over the 60 month Chapter 13 plan. Once the plan is completed, the property is 100% yours – with no mortgage attached!
Mortgage Modification Mediation (MMM Program)
The MMM program has been wildly successful, helping thousands of South Floridians save their homes from foreclosure. In a nutshell, this is a program administered by the Bankruptcy Court in our district. The goal is to help the debtor achieve a modification of the defaulted mortgage, even if they have previously been denied a loan mod. Failing that, the mediation with the lender and lender’s attorney can be a good time to discuss short sale or other non-retention options.
Conclusion
With thorough analysis, careful planning, and proper application of the Bankruptcy rules and laws, property owners have a number of available options to achieve their objective of saving their homes. Contact an experienced Chapter 13 bankruptcy attorney to see if you might benefit from all that bankruptcy has to offer in this regard.