Denver Bankruptcy Lawyer Wink & Wink Can Help You Decide Your Next Steps
If you’re like most people, your mortgage is one of your biggest regular expenses. Even if things are going well, it may be hard to always make the payments in full every month.
One option, if you’re dealing with financial hardship, is asking your mortgage servicer for “mortgage forbearance.” In short, mortgage forbearance is a temporary pause on being required to pay your mortgage. This period often lasts three to six months.
During the COVID-19 pandemic, the United States government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help Americans struggling financially. Among other things, the CARES Act offered the possibility of mortgage forbearance lasting even longer, anywhere from six to 18 months.
Thus, if you get approved for mortgage forbearance, you might not have to make payments for up to 18 months.
While for some, this period of mortgage forbearance may help them completely get back on their feet financially, as they can save money or put that money toward other debts. For others, though, once the mortgage forbearance periods end, they may still deal with crushing financial hardship. Perhaps your business in Castle Rock still hasn’t recovered. Or you lost your job in Golden, and you’re struggling to find a new one. The prospect of once again owing money on your house in Brighton may fill you with dread.
If your mortgage forbearance period is ending soon, you have a few options.
First, let’s look at some basic facts about mortgage forbearance.
Some Key Facts About Mortgage Forbearance
- You are not required to make any payments during your period of mortgage forbearance.
- You will, however, still owe the money that you would’ve paid during that period. That is, this isn’t wiping away three to 18 months of payments, just delaying them.
- Interest will still accrue on your mortgage during the period of forbearance.
- You are expected to once again resume regular payments after the period of mortgage forbearance ends.
- You don’t then owe a sizable lump sum after the period ends, covering the period where you didn’t pay. No, it’s back to your normal payments, though you will be expected to at least eventually pay off the money during the term of your mortgage.
- There are no fees or penalties for getting mortgage forbearance.
Options After Mortgage Forbearance Ends
If you’re able to resume regular payments, no problem, and pay off the money you didn’t pay during the period of mortgage forbearance, then you can do so.
If, however, you don’t think you’ll be able to make the regular payments in full, plus the money you owe from your period of forbearance, then you have some other options.
- Payment plan – This is when you work with your mortgage servicer to pay off the money you didn’t pay during the mortgage forbearance period in smaller amounts over the future months. You pay it off gradually.
- Deferral – The money you owe from the mortgage forbearance period is deferred and is not due until the end of your mortgage or when you sell your house or refinance. The deferred balance, which is made up of the payments you did not make while in forbearance, does not accrue interest. Thus, you’ll then owe a bigger amount at the end of your mortgage, but you will not have to pay it until then (unless you sell or refinance sooner).
- Modification – You work with your mortgage servicer to modify your loan. A mortgage modification is essentially a new loan. It is like a refinance. While the terms may vary, mortgage modification is often better than any refinance you can obtain because you do not pay closing costs and it may be possible to get a lower interest rate or longer loan term (sometimes 40 years) than would be available through a traditional refinance.
With the payment plan option, your monthly payments will then increase. If you’re struggling financially, this certainly won’t help!
For most people, deferral or modification are the best options.
That said, there are millions of homeowners coming off mortgage forbearance and mortgage lenders are swamped with processing modifications and deferrals for these folks. Your lender may not contact you about the end of forbearance or may not follow up after some initial communication. While it may seem great to not pay your mortgage, you are heading into a danger zone if you don’t have a modification or deferral in place when forbearance. Those who are not proactive about things at the end of forbearance may end up in foreclosure. You should not kid yourself. While forbearance was great for people struggling through COVID, you will ultimately have to pay your mortgage to keep you home.
How Chapter 13 Bankruptcy Can Help With Mortgages
If you’re one of those who was behind on obtaining deferral or modification after forbearance and is now facing foreclosure, you can consider bankruptcy as a means of saving your home. In Chapter 13 bankruptcy, you can stop foreclosure and resume mortgage payments while curing the missed mortgage payments during forbearance through a three to five-year Chapter 13 payment plan. And if it is not affordable to pay all the missed mortgage payments over three to five years, you may be able to apply for mortgage modification or a refinance during your Chapter 13 Plan.
Bankruptcy can also help eliminate much of your unsecured debt, such as credit card debt and medical debt. Filing for bankruptcy doesn’t mean you’ll be kicked out of your home and living out on the street, or that you’ll never be able to get a credit card or home loan again. Not at all. In fact, it can be a smart move to get your financial life back on track before it gets much worse.
Here are some of the current exemption categories recently passed to Colorado’s exemption laws from Senate Bill 022-085, which amended portions of Colorado Revised Statutes §§ 13-54-102, 13-54-102.5, 8-80-103, 38-41-201, 38-41-205 and 38-41-201.7. As a result of these changes, Coloradans can now protect up to $250,000 in equity in their homes. If you, your spouse, or a dependent family member is at least 60 years of age or disabled, the amount you can protect goes up to $350,000.
There are many options for you. If you’re overwhelmed with debt, it’s time to speak with a Denver bankruptcy attorney, such as Wink & Wink.
Bankruptcy is a big decision and should not be taken lightly. It’s also crucial you work with a skilled bankruptcy law firm, such as Wink & Wink, who serves Denver, Aurora, Fort Collins, Commerce City, and more. They can help you determine if filing for bankruptcy is the right move for your financial situation, and how to be able to keep as many assets as possible, including your home.
Speak With Colorado Bankruptcy Lawyers Wink & Wink
If your mortgage forbearance has ended or is ending soon and you’re unsure how you’ll be able to make payments again, it’s time to consider filing for bankruptcy. Wink & Wink, bankruptcy attorneys that serve the greater Denver area, will review your case and determine the best option for your financial situation and your mortgage. Call Wink & Wink at (303) 410-1720, or contact us online to get the help you need.