Chapter 13 Bankruptcy
The filing of a chapter 13 bankruptcy case put 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.
Mortgage Modification - Mediation
Within the chapter 13 case, a property owners may make use of the Bankruptcy Court's "Loss Mitigation Mediation" (LMM). Under this program, a Bankruptcy Court appoints a meditor to help the parties reach an agreement to modify the mortgage.
A chapter 13 plan may also provide for the reinstatement of the 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."