Can Filing Bankruptcy Save Your House? – Avenues in Spokane Washington
If you’re having trouble making your house payments, your bank might not be the best place to turn for help. Contrary to what many think however, filing bankruptcy may be solution, even though it is not perfect.
First, the banks: It’s not that they can’t help you. Mortgage assistance programs are designed to help people stay in their homes. The Obama administration’s Making Home Affordable program (wwww.MakingHomeAffordable.gov) has reportedly helped more than 1 million homeowners reduce their monthly payments, typically by $500 a month or more.
Often, however, lenders seem more intent on obstructing the delinquent homeowner’s efforts to keep making payments than helping them to stay in their house.
I’ve heard from many frustrated clients who say they’ve spent hours on the phone with banks, especially larger institutions, who seem to be giving them the runaround. They might steer the borrower to the proper paperwork but then, once it’s filed, fail to answer or return follow-up calls. Or they might claim that timely applications were late, and require the lender to start the process all over again. Or they might claim after the fact that something extra was needed to make the claim viable, such as sending by certified mail.
Why is this? In some instances, your lender may have no vested interest in whether you stay in your home or not. In some instances, in fact, the lender could come out ahead if you default. If the FHA secured your loan, or if you’re paying private mortgage insurance, the bank gets paid, anyway.
The result: a long, drawn-out process that takes 90 days or more, even up to six months, during which time the homeowner falls more and more deeply into debt. This mortgage assistance program, which had shone like the proverbial light at the end of the tunnel, has become a dead-end. Despair sinks in, with bankruptcy seemingly the only way out.
Or is it?
Bankruptcy can eliminate your debts, allowing you a fresh financial start, or allow a re-organization of debt providing monthly payments you can afford. If you declare either Chapter 7 or Chapter 13 bankruptcy before you’re in default, you may be able to keep your house and your car by having your attorney file reaffirmation agreements with those lenders stating that you’ll continue payments to them.
However, if you’re behind in your house payments and you file a petition to have all or most of your debts absolved — Chapter 7 — you will not save your house. You cannot reaffirm your mortgage payments if you’re behind, even one single month. Lenders will not allow it.
Chapter 13 bankruptcy, or reorganization, might be a possibility for you to save your house, though. A chapter 13 plan, here in Spokane, will require that you divide the amount of your arrears by 36 — the number of months Chapter 13 bankruptcy gives you to pay the arrearage in Real Estate — and add that amount to your existing monthly payment. For instance, if you owe $12,000 in back payments, the bank will increase your monthly house payment by $333.
This option can be expensive, but if you have a regular income and you want to stay in your house — and you can afford the inflated amount — it can be a viable option for those in arrears on their mortgage payments.
In any case, you’re well advised not to go it alone. A good attorney not only can steer you through the murky waters of foreclosures and bankruptcy, but may even have ideas for staying afloat that hadn’t occurred to you. If you’re in financial trouble and fear losing your house, contact the Quiroga Law Office, PLLC today at (509) 927-3840. We may be able to help you keep your home, sweet home.
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