MenuBankruptcy, Chapter 13 Bankruptcy especially, is routinely used to save a house from foreclosure. It boils down to a two step process: (1) stay the foreclosure with the filing of the bankruptcy case and (2) catch up the past-due amount over 3 to 5 years.
Mortgage Debt
Debt secured by either a mortgage or deed of trust on real property, such as a house and land. Foreclosure and sale of the property is a remedy available to the lender. Mortgage debt is a debt that was voluntarily incurred by the owner of the property, either for purchase of the property or at a later point, such as with a home equity line of credit.
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Frequently Asked Questions
Our frequently asked questions also address Mortgage Debt:
Can Chapter 7 Bankruptcy Stop Foreclosure?
The answer to this question is a clear "sort of". While the filing of a chapter 7 bankruptcy will stop a foreclosure sale, it will seldom prevent the eventual foreclosure.
How does Chapter 7 help when I am giving up a house to foreclosure?
Sometimes, a house becomes too expensive for its owners to continuing living in and paying the mortgage. Changes in income can make what was once affordable now unmanageable. Problems with a house or mortgage terms can push the cost of ownership beyond one's means. Sometimes, there are opportunities to work things out the mortgage. Other times, the smart decision is to walk away from the house and allow the bank to foreclose.
Can the Mortgage Bank refuse my Chapter 13 Bankruptcy?
No, a bank doesn't have discretion on whether or not a loan is involved in a chapter 13 bankruptcy.
What is Force-Placed Insurance?
Almost all residential mortgages require that the home be insured against causality, with the lender being a beneficiary. Such a requirement is not surprising. A residential mortgage involves lending a sizable amount of money, with the value of the home as collateral providing assurance to the lender of being repaid. Fire and other disaster risks the destruction of the collateral, and a bank would desire insurance for many of the same reasons an owner of a home free-and-clear would.
What happens to my mortgage in chapter 7 bankruptcy?
What happens to my mortgage in chapter 7 bankruptcy?
Blog Posts
We have discussed Mortgage Debt in the following posts on our bankruptcy blog:
Behind on the Mortgage: The Math of a Chapter 13 Cure
Dec 5, 2011
A significant power of chapter 13 bankruptcy is the ability to propose a plan that cures a default associated with a long-term debt, i.e. to catch up a delinquent mortgage so that it is once again current. Due to this, chapter 13 is an option frequently considered by families who have fallen behind on their home mortgage payments. Understanding the basics of how a cure payment is calculated is important for appreciating the value and constraints of chapter 13.
Choices When Behind on Mortgage Payments
Jan 24, 2012
The house payment is the single largest expense for many families. When finances get tight and bills start adding up, many people get behind on their mortgage payment. In North Carolina, recent statistics put about 3-4% of home mortgage loans at least 90 days past due. In this post, I briefly summarize the major options for a homeowner who is behind on their payments, including bankruptcy approaches.
Bankruptcy and Second Mortgages: Strip-off and Other Options
Feb 15, 2012
In many respects, second mortgages are treated the same as first mortgages in bankruptcy. The most important difference is that an unsecured second mortgage can be stripped off the property, when more debt is owed on the first mortgage than the property is worth.
Chapter 13 Bankruptcy and the North Carolina Foreclosure Process
Sep 18, 2013
One common use of chapter 13 bankruptcy is prevent foreclosure of a home. Chapter 13 allows the owner/borrower to bring the loan current over a period of years and keep his or her house. When does one invoke the power of chapter 13 to prevent foreclosure?
