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Starting today, June 1, 2010, HAMP Home Loan Modifications cannot be denied because you are in an active chapter 7 or 13 bankruptcy.

This is significant for many consumers. Many consumers facing foreclosure need both bankruptcy and a modification.

A bankruptcy filing will automatically stay a foreclosure on your home and a modification of the terms of the mortgage will make the home more affordable.

For more information about this important change please visit https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1002.pdf

Bankruptcy can save your home from foreclosure!

The moment a bankruptcy case is filed with the bankruptcy court the automatic stay comes into effect. The automatic stay prevents creditors from taking certain actions against you including foreclosing on your property.

 Bankruptcy will even stop a foreclosure if filed minutes before the foreclosure sale.

Once the case is filed and the foreclosure stopped you may be able to catch-up missed mortgage payments during the course of a chapter 13 plan, eliminate second or third mortgages, or have time to work out a modification with the bank.

If you file bankruptcy you will keep your home; unless you want to surrender it to the bank.

In order to keep your home you will need to at a minimum be able to make the current monthly payment on the first mortgage.

If you are filing chapter 7 bankruptcy, you will need to be current with all mortgages on the home when you file and continue to be current after the case is over. This is just like it would be without the bankruptcy filing. As long as you are current with the mortgage payments the bank will not foreclose.

If you are behind on your mortgage, or have a second mortgage, worry not, you will still be able to keep your home. In chapter 13 you are given up to 5 years to catch-up the missed mortgage payments under a court approved plan. Your bank will legally be barred from foreclosing during your bankrutpcy.

Additionally, in chapter 13 you may be able to eliminate your second mortgage and keep your home. In order to eliminate the second mortgage you will have to prove to the Court that the value of your home is less than the value of your first mortgage.

Filing bankruptcy does not prevent you from buying any property, including a new home or cars. However, the better question is; when will a bank give me a mortgage for a new home?

Chapter 7 bankruptcy will be listed on your credit report for ten years after you file bankruptcy. The listing of the bankruptcy on your credit report is not a legal bar to obtaining credit; however, it is a factor that a bank will use in determining whether or not to extend you credit.

Smaller loans, such as credit cards, will be available to most debtors shortly after filing. Most debtors start getting solicitations for post-petition credit cards within a month or two of filing.

Car loans may also be available right after the case is filed but you should expect a very high interest rate.

As for home mortgage, it will likely take 2 – 3 years until you can expect to be approved. However, some individuals get a new home mortgage in as little as 1 – 2 years or sooner.

The bank’s decision to extend credit is unique based on your situation, the bank will look at factors such as, credit reports and score and income to debt ratio to determine to extend credit to you.

 Filing bankruptcy will automatically stay any foreclosure proceeding. So long as your bankruptcy case is filed prior to the actual foreclosure sale.  

If your intention is to permanently save your home from foreclosure then you will need to catch-up your missed mortgage payments in chapter 11, 12, or 13.

In chapter 13 you will have to make a monthly payment for either 3 or 5 years. This payment must be enough to pay back the entire arrears on at least the first mortgage.

In some cases you are able to eliminate the second mortgage and keep your home.  

The following is a list of FREE internet sites that may help in the valuing of your home:

http://realestate.yahoo.com/Homevalues

http://www.zillow.com/

http://www.cyberhomes.com/

http://www.bankofamerica.com/modular/index.cfm?template=hc_home_worth_modular

It should be noted, that often the internet values do not reflect the current value of your home and a formal appraisal or brokers price opinion are needed to determine value.

The goal for most individuals in bankruptcy is to receive a discharge of their debts. A discharge is a release of your legal obligation to repay your debt. With limited exception the discharge will discharge all your debt including credit card bills, medical bills, auto loans, home mortgages, and some tax obligations.

Some debts do not typically get discharged in bankruptcy including student loans, some tax obligations, child support, alimony and government or court fines (such as a speeding tickets).

The discharge does not typically affect a lien held on property. Therefore in order to for the debtor to keep property that has been used as collateral to secure a loan, the debtor must continue to make payments.

Some liens can be removed in bankruptcy. Liens held by the second mortgage can be removed, in this case the debtor will be able to keep their home and never again have to pay the second mortgage.

Judicial liens can also be removed. These are liens that have come out of a court action. Typically these occur after a credit card company has sued you over a debt and then they put a lien on your home.  

Despite a recent stabilization in home prices, CNN Money is reporting that home values will continue to decline in 2010 (http://money.cnn.com/2009/12/31/real_estate/home_price_drop/index.htm) .

If the housing market continues to decline more people, and perhaps you, will be able to eliminate your second mortgage and retain your home in chapter 13 bankruptcy.

If the value of your home is equal to or less than the value of your home then you will be able to eliminate your second mortgage in chapter 13. Since the housing market is continuing to decline you may be able to eliminate your second mortgage in 2010 even if you were unable to in years past.

In chapter 13 you make a reasonable monthly payment on your debts, based on your income and expenses and not on how much money you owe creditors, for either 3 or 5 years. After making all the payments whatever has not been paid through the bankruptcy is discharged.

In an article from the Worcester Telegram and Gazette (http://www.telegram.com/article/20091230/NEWS/912309982/1002) it is reported that foreclosure petitions in Massachusetts remain high.

The good news is that the actual number of foreclosures that have been completed for 2009 has been less than 2008. However, the number of foreclosures started with the filing of a Petition to Foreclose has increased in 2009 from 2008.

Bankruptcy has several options that may help if you have facing foreclosure, in chapter 13 you may be able to eliminate your second mortgage forever, and catch up the missed payments with the first mortgage.

Additionally, you may be able to eliminate all your unsecured debt in either chapter 7 or 13 thus freeing up money to pay towards the mortgage.

If you are facing foreclosure, please give me a call and we can find a solution to the problem. Bankruptcy can stop the foreclosure and save your home BUT ONLY if you file before the foreclosure sale.

Debtors filing chapter 13 bankruptcies may be able to eliminate their obligation to repay their second mortgage and still retain their home.

In order for to eliminate the mortgage and keep your home the value of your home must be equal to or less than the value of the first mortgage.

In chapter 13 bankruptcy the debtor makes a reasonable monthly payment, based on the debtors’ income and expenses, for either 3 or 5 years. After making all the required payments the debtor will receive a discharge of her personal obligation to repay all most all of her debts and the judge will also order the lien, the mortgage, removed at the registry of deeds.  

With home prices continuing to decline many home owners are now able to get rid of their second mortgage forever. Couple this with the discharge of unsecured debt, such as credit card debt, many people are able to get a needed fresh start and save their homes.