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Arrears

Curing Mortgage Arrears

In these uncertain economic times, job loss, pay cuts and unemployment mean that many homeowners have fallen behind on their mortgage payments. Some mortgage modification programs require you to become technically behind on your payments while the modification process is underway. Once you fall behind on your mortgage, the odds are that you will lose the home. If you were having trouble paying the set monthly payments previously, you will likely have even more trouble making those payments plus catching up on the back payments (or arrears) in the short time frame the bank will require you to do that before initiating foreclosure proceedings.

Bankruptcy can help. If you have fallen behind on your mortgage payments and are facing foreclosure, you can pay off your arrears over 3 to 5 years in Chapter 13 bankruptcy. This can be a very powerful tool to keep you in your home.

As mentioned above, mortgage banks often demand full payment of arrearages in order to prevent foreclosure. Chapter 13 bankruptcy forces the lenders to take the arrears in a 3 to 5 year payment plan which significantly reduces the financial burden of making up back mortgage payments. Of course, you will also have to pay your contract mortgage payments in addition to the arrearage payment.

Even better, if you are also eligible to strip a 2nd mortgage or home equity line of credit, you will not have to pay the arrears on any liens that bankruptcy is wiping out. Those arrears will simply go away.

If you are behind on your mortgage but can afford your mortgage payment, please contact us for a free consultation to find out how you can make up your arrears in bankruptcy.

Curing arrears over 3 to 5 years is not possible in Chapter 7 bankruptcy. Many people have a bad view of Chapter 13 bankruptcy because of misinformation or cases they have heard of that weren’t handled properly. Actually Chapter 13 bankruptcy is the unsung hero for homeowners who want to stay in their homes. It is the only chapter of consumer bankruptcy that allows you to cure arrears over a long period of time. It is also the only chapter of consumer bankruptcy that allows you to wipe out a second or third mortgage, making it possible to keep your home.