Keeping Your Home California and Bankruptcy

         During these tough economic times we meet many people and families who are struggling to keep their homes.  The most common thread to their struggles is that either property taxes or their mortgage payments are defaulted.  Usually there is a reduction in income, or possibly increased mortgage payments under an adjustable rate mortgage that has caused the financial imbalance. While there are state programs that can help such as Keep Your Home California, or internal programs that your lender may have to help with short term defaulted solutions, bankruptcy should also be considered as a tool, and option to help save a home in jeopardy of loss.

         With the acquisition of real estate, comes for most people, an investment in the single largest asset of their financial life.  When a property is lost in foreclosure, this event will be reported on a person's credit report, with obvious derogatory consequences.  Before this happens, bankruptcy should be considered.  For many who have been turned down for mortgage modifications, bankruptcy is the solution, to allow for reinstatement of the mortgage, or to allow for a new mortgage modification application through the bank's loss mitigation bankruptcy department.  Amazingly, this has been the avenue that many people have found success in their struggles to save their home.

      A Chapter 13 case can stop a pending foreclosure sale, and give individuals breathing room, a sense of security, and extra time to sort out the problems associated with the mortgage.  (The bankruptcy will prevent the foreclosure until the case is closed or until the lender files a motion for relief from stay with the court).

The bankruptcy code allows people to reinstate their mortgage over the term of their Chapter 13 plan (3 to 5 years).  Upon the completion of their case their mortgage will be current and they will no longer be facing foreclosure (that is assuming that all payments were made after their case was filed).

Here in California's bay area, there are two divisions which give debtors a second path for dealing with their mortgage arrears during the Chapter 13 case.  This is to let the people try to modify their mortgage to deal with the arrears.  This type of plan can be useful to people who have large arrears that are not easily cured through a plan.  This is available in the San Jose division (which includes Santa Clara, Campbell, Gilroy, Salinas, Monterey, and other outlying cities), and in the San Francisco division.

Another aspect of Chapter 13 that helps people and families keep their homes is the ability to remove a second mortgage.  This is available when the property value is lower than the debt owing on the first mortgage.  This can reduce the monthly obligations associated with the home, and make the retention of the property more feasible.  

Bankruptcy is a financial tool that should be considered when the finances are too tight, or when a person's home becomes unaffordable.  Many attorneys offer a free consultation that can be used to learn how bankruptcy can help you.  Both the bankruptcy system and the people within the system are here to help.