Bankruptcy And Mortgage Foreclosure Advice

Bankruptcy filings went down 67% in the second quarter of 2006 compared with the same period in 2005. For the previous year, bankruptcy filings fell almost ten percent. Bankruptcy cases filed in federal courts during that period totaled 1,484,570. This is the lowest number of filings since the 12-month period ending September 2001.

Mortgage delinquencies have been a factor in many of these bankruptcies. Las Vegas bankruptcy attorney David M. Crosby notes a few of the main reasons behind this surge in mortgage problems.

“Most of it is [tied to] the end of the housing boom, but I do see a good percentage of clients who got caught by a change in their mortgage rates. Some homeowners are calling it quits. A surprising number of people are walking away from their homes rather than trying to save them, either because the rate on their loan has jumped or because they owe more than the home is worth.”

Bankruptcy And Mortgage Foreclosure
Can filing for bankruptcy help homeowners avoid foreclosure? Here is what the new laws say about Chapter 7 and Chapter 13 bankruptcies in regard to foreclosure; as interpreted by the experts at

Chapter 7 bankruptcy is what’s known as a ‘liquidation bankruptcy.’ Its automatic stay is only a temporary defense against mortgage foreclosure. As opposed to Chapter 13 bankruptcy, Chapter 7 gives filers a fresh start, but it does not provide them with the opportunity to repay their mortgage arrears over time.

Chapter 7 bankruptcy is the best option for homeowners who know they will not be able to make their mortgage payments due to job loss or other life circumstance. Surrendering their homes allows them to move forward without a deficiency judgment against them.

Chapter 13 bankruptcy can stop mortgage foreclosure proceeding if it is filed before the bank or mortgage company can sell the house. The filing gives homeowners time to catch up on delinquent payments.

Chapter 13 bankruptcy provides for the repayment of the mortgage arrears and other secured debts from future income rather than from the liquidation of current assets. It also fixes the size of the payments so that filers can cover their living expenses first and then apply any surplus to their creditors.

During the Chapter 13 plan, filers must also keep current on monthly payments. If not, the mortgage company can ask the court to lift the protection of the bankruptcy code and resume foreclosure proceedings.

Mortgage Refinancing
One advantage to a Chapter 13 bankruptcy is that it allows the possibility of mortgage refinancing. Refinancing means getting a new mortgage to pay off the old one. Depending on the amount of equity in the home, money from the new loan can be used to catch up on late payments.

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