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Chapter 13 can be a last, and sometimes the only chance to save your home.  But when is Chapter 13 the right choice?

First, some basic facts about what a Chapter 13 can and cannot do.  In most cases, a Chapter 13 won’t change the regular monthly payment you are required to make on your home mortgage (or mortgages, if you have more than one).  Chapter 13 will not change the interest rate on your mortgage, or stop an adjustable rate from increasing your payment, or prevent a balloon payment from coming due.

Shortly after filing Chapter 13, you will be required to resume making regular payments.  In addition to making regular mortgage payments, you will be required to begin making payments on the mortgage arrears. This can be amortized over 60 months. That means that each month, you will make one regular mortgage payment, plus an amortization on the accumulated delinquency. The upside is that the bank must accept this plan, ordered by the court. The downside is, you must resume payments.

So, if you fell behind on your mortgage payments because you were out of work for a while, or you had unexpected expenses, or your income was interrupted by a tax levy, wage garnishment or the like, Chapter 13 may be what you need.  Chapter 13 will allow you to catch up over time, even though your mortgage company had been demanding immediate payment of the entire past-due amount.  If you fell behind because you were overextended on other obligations, like car loans and credit card debts, Chapter 13 may allow you to restructure your debt so that you can afford your mortgage payments.

 On the other hand, if your mortgage is behind because you just don’t have sufficient income to make the payments, Chapter 13 may not help.  Your budget may be too tight because of loss of employment, a disability, or because the repayment terms of your mortgage have changed.  If your income has decreased, or if your mortgage payment has been adjusted upward, you may not be able to take advantage of Chapter 13 unless you are able to make up your budgetary shortfall by, for example, restructuring other obligations.

However, if your home is worth less than you owe, a bankruptcy filing provides a golden opportunity, it stops a foreclosure, and gives us time to apply for a loan modification, that could include debt forgiveness on past dues, plus a modification of the entire loan amount to current fair market value. This is not a guarantee for everyone, but it illustrates the point out that we have achieved amazing results for many other clients.

Chapter 13 can be a valuable tool to save your home, negotiate a loan modification, and to restructure other debt. An honest review of your situation, including the realities of your budget, is vital to determine the feasibility of a successful Chapter 13 Plan.

For a free consultation on how Chapter 13 can work for you, contact the Law Offices of Paul M. Allen, at the Glendale office: (818) 334-5445, or in Cerritos, (562) 356-5462. Attorney Paul Allen will meet with you and discuss your options.

(This article is for information purposes only, and does not necessary reflect the company’s opinions and views on general issues. We make no warranty, prediction nor representation, nor do we assume any legal liability for the completeness of any information and its effect on any case. Each case is different and results depend on the facts of each case. Consult with and retain counsel of your own choice if you need legal advice.)

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