Using Bankruptcy to Repair a Delinquent Mortgage

Homeowners who cannot pay their mortgage may be desperate to get rid of their obligation.  There are many options available, including refinancing, loan modifications, short-sale, deed-in-lieu of foreclosure, foreclosure or bankruptcy.  Some homeowners who face foreclosure may turn to the bankruptcy process for help.  By filing for bankruptcy, it may be possible to stop the foreclosure process and allow borrowers to catch up on missed payments.

You can protect your home from a foreclosure by filing a Chapter 13 bankruptcy.  In doing so, you can work on a structured debt repayment plan in which you can repay your loan within three to five years.  Chapter 13 can also give you an automatic stay protection, which can prevent your creditors from suing you.

How to Notify the Mortgage Company of Bankruptcy

If you choose to file a Chapter 13 bankruptcy, it will allow you the ability to develop a payment plan in which you pay off most of your creditors over a two to five-year period of time.  If you have a home mortgage loan, that debt will become part of your overall Chapter 13 bankruptcy plan.  Your mortgage lender needs to be advised of the case, so that your home loan becomes a part of the bankruptcy case.

You can draft a letter to your mortgage lender before filing for bankruptcy.  In doing so, you will be able to open an important line of communication with this important creditor. 

Get Help from a Specialized Bankruptcy Lawyer

The first and most important step in beginning the bankruptcy process is to speak with a qualified bankruptcy attorney and start the discussion that may lead to the decision to file a Chapter 7 or Chapter 13 bankruptcy.  If you are facing foreclosure, the automatic stay created by a Chapter 7 filing serves as a temporary defense against home foreclosure.  By choosing to file a Chapter 13 bankruptcy, it can save your home if you have fallen behind on your mortgage payments.  Filing a Chapter 13 can be expensive for the homeowners.  In that case, filing a Chapter 7 bankruptcy may be favorable for them.  Whatever they decide, it’s best to speak with a legal professional before pursuing either action.