Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
It is reported in the media every day that many Miami and Broward homeowners are "upside down" or "underwater" with their homes. That is, they owe more on their mortgages than the value of the homes. Many homeowners financed their home on an "80-20" basis. That is, they borrowed 100% of the value of the home, structuring 80% of the borrowed sum into a first priority mortgage and 20% of the borrowed sum into a second priority mortgage. In many or most cases, the value of the home has fallen at least 20-30% at present and some experts expect a further substantial decline.
What is the Miami or Broward homeowner to do? The recently passed $700 billion bailout package did not include a proposed bankruptcy code amendment that would have given the bankruptcy courts the power to modify and reduce mortgages on principal residences and reduce them to the fair market value of the home that serves as collateral. It also appears that the various well publicized federal programs have not been widely used for a variety of reasons. Many homeowners also report that they get the "runaround" when they attempt to contact their mortgage company to arrange a modification or workout. Many homeowners find that they are unable to modify their first priority mortgage due to the last of cooperation by the second priority mortgage holder.
The distressed homeowner should be aware that Chapter 13 bankruptcy does offers various possible opportunities. First, if the value of the home has fallen so substantially that there is no equity to secure the second priority mortgage, this second mortgage may be "avoided" and deemed an unsecured claim. Unsecured claims are usually only paid a percentage on the dollar in Chapter 13, typically about 5 - 20%, and the unpaid balance discharged. This would present the homeowner the opportunity to negotiate a modification of the first mortgage without the necessity of placating the second priority mortgage holder.
Another benefit of filing for Chapter 13 bankruptcy is that it may present an opportunity to get the attention of the first priority mortgage company and negotiate a modification of the mortgage, including a reduction of the interest rate or principal balance. It may also present an opportunity to stop the foreclosure and give one enough time to review and obtain relief under any of the new federal programs being put into effect for distressed homeowners.