Saving Your Home Through Personal Bankruptcy

Using Bankruptcy to Modify Your Mortgage

Under the current rules you can modify your mortgage down to the actual value of your home if any of the following is true: 

Your mortgage is not secured by your residence alone.

Your mortgage was for a mobile home that is your primary residence as it’s considered to be personal property. 

Your mortgage was for a multi-unit property not a lone house or condominium. 

Your mortgage was for not only your home but adjacent land such as farm land that is not considered part of your residence. 

If you do manage to get your mortgage modified, you’ll have to include your entire mortgage in your chapter 13 payment plan. For example, if your mortgage is for $125,000 and the current value of your home is only $90,000, you’ll get your mortgage balance reduced to $90,000 but you’ll have only the five years to pay the whole thing off. 

Unfortunately, most people find the high payments so difficult they abandon the whole mortgage modification process altogether.  

You may be able to have any second or third mortgages converted to unsecured debts and then pay them off at the unsecured rate your chapter 13 plan dictates.  

Challenging Foreclosures in Automatic Stay Hearings 

Before the housing market crashed bankruptcy judges used to routinely grant a mortgage holder’s motion to life the automatic stay and clear the way for a foreclosure. But now it’s become public knowledge that many of the mortgage banks don’t have the required documents to prove their claim on the property. So many mortgages have been bought, sold, transferred lately, the most recent holder is often unable to produce the required “promissory note” meaning the original mortgage contract. 

As a result courts are being more strict and requiring that the proper legal documents be produced before the stay can be lifted. Keep this in mind if you’re attempting to keep your home despite having to file for bankruptcy protection. 

Have your attorney obtain a continuance until the binding contract be produced. Imagine what it would mean if they can’t come up with the paperwork!