Monday, February 17, 2014
Saving Your Property from Foreclosure in Chapter 13 Bankruptcy
Chapter 13 Bankruptcy
The filing of a chapter 13 bankruptcy case puts a stop to most creditor actions, including most foreclosure cases. Under chapter 13, a property owner is given the opportunity to reorganize his affairs while under the protection of the Bankruptcy Court.
The following three main features available under chapter 13 are described below.
1. Mortgage modification
2. Chapter 13 Plan to reinstate mortgage
3. Avoiding of junior mortgages
Mortgage Modification - Mediation
Within the chapter 13 case, a property owners may make use of the Bankruptcy Court's new "Loss Mitigation Mediation" (LMM).
This program is innovative in certain respects. Under this program, a Bankruptcy Court appoints a meditor to help the parties reach an agreement to modify the mortgage. A mediator is able to help the homeowner and mortgage company communicate and reach an agreement for modification.
This program also involves the use of an internet "portal" which allows the homeowner to upload all the documents needed for the mortgage company to consider for a modification. Through this portal the homeowner and mortgage company are also able to communicate.
If a homeowner does not want to modify his mortgage, he may propose a chapter 13 plan to provide for the reinstatement of his mortgage by catching up the mortgage arrearage over a period of 3 to 5 years, while maintaining current payments.
Avoiding of Under Water Mortgages and Association Liens
If a second mortgage is "under water," the involved lien may be avoidable. To be avoidable as to residential property, there must not be any equity in the property to support the mortgage lien. That is, more is owed on the first mortgage than the value of the property. Association liens, including condominium association liens, may also be avoidable in whole or in part, to the extent that they are "under water."