Home Loan After Bankruptcy

Can Filing For Bankruptcy Prevent Foreclosure?

However, if you’re like many other homeowners in this situation, you may have let the situation spiral out of control and not notified the lender, hoping that your financials would look better the following month. When you leave the lender hanging on for payment for a lengthy period they will probably start legal proceedings for a foreclosure – after all they need to look after their own interests. So what can you do? Under these circumstances your options are pretty limited and you might have to think about taking the extreme measure of filing for bankruptcy to give yourself some breathing space.

Filing For Bankruptcy – What Are Your Options?

When filing for bankruptcy there are two options available to you – chapter 7 or chapter 13 bankruptcy. Based on your situation one of them maybe better suited over the other. In order to make this decision you need to know the differences between the two and their respective pros and cons, which is what we are going to briefly talk you through now.

Chapter 7 Bankruptcy

Filing for this type of bankruptcy will never permanently halt the foreclosure process, it simply takes the heat off you temporarily. If you’re unable to catch up on missed payments you owe, can’t prove that you’ll be in a position to meet future payments or don’t have enough equity in your home then the lender will be granted what’s called a "relief from automatic stay".

You won’t keep your home filing for this type of bankruptcy, but it will permit you to cancel your debt or a large amount of it, if the lender acquires your home. This type of bankruptcy also protects you from being sued for the price difference, if the market price of your home has dropped since you initially purchased it.

Chapter 13 Bankruptcy

With this type of filing you have a chance of keeping your home. A bankruptcy payment plan for the total of sum of all missed payments will be devised and you will be required to pay this on top of your normal monthly mortgage installments. These payment plans typically last from 3 to 5 years. If you fail to satisfy the financial requirements of the payment plan then the lender will be granted relief from automatic stay and foreclosure proceedings will be initiated and you’ll lose your home. Filing for bankruptcy as a means of avoiding a foreclosure should only be used when appropriate, which is typically when you have no other option at all. You need to take into consideration the negative affect it will have on your credit rating which could make it difficult for you to gain access to loans in the future.

Chapter 13 Bankruptcy: What You Need To Know

With foreclosure rates rising again in April, if you’re really struggling financially you might be sat there wondering how you’re going to avoid the dreaded process that will ultimately cost you your home. One option that is being increasingly utilized by American homeowners is filing for chapter 13 bankruptcy. But what does it involve and what benefits does it offer?

How Does Chapter 13 Bankruptcy Work?

The aim of the plan is not to wipe out all your debt with the sale of your most valuable possessions (as is the case with chapter 7 bankruptcy) but rather to get your debt back under control. This is done through the formation of a debt payment plan, which will typically run for a duration of 3 to 5 years. Your income will be analyzed, to determine how much you can realistically pay each month. Debts on secured forms of credit will be prioritized (such as your mortgage payments) over unsecured forms.

You will still need to keep up your regular mortgage payments each month, on top of the payments towards your debt repayment plan. A trustee will be appointed, who will act as a go-between for you and the lender. If a chapter 13 bankruptcy is successfully filed, you’ll no longer have to have direct contact with your lender. The agreed payments will be transferred to the trustee each month, who will then distribute the funds to any creditors outlined in the plan.

When Should You Consider Filing For A Chapter 13 Bankruptcy?

Due to the bleak economic conditions being experienced all over the world, bankruptcy no longer has the same connotations as it once had. If you find yourself in any of the following situations, it could be an option you should give some thought to.

If you have the stability of a job providing a steady stream of income, but you are struggling to meet monthly repayments and your lender isn’t willing to refinance or modify the details of your loan. Your lender has started foreclosure proceedings because you have fallen behind on the repayment schedule. You’re willing to try and repay the debts you owe and want to fight to keep your home, something that is not an option with chapter 7 bankruptcy. If your mortgage is now underwater, meaning the home is actually valued at less than the amount you owe.

The Benefits Of Chapter 13 bankruptcy: The key thing here is that you actually have a realistic chance of keeping your home as long as you stick to the debt repayment plan. Other routes to avoiding foreclosure won’t offer you this.

By filing chapter 13 bankruptcy you’ll halt the foreclosure process (if it’s been initiated), and providing you qualify, you’ll be given the opportunity to prevent foreclosure from ever bothering you again. If you’ve also fallen behind on repayments for other forms of secured credit, that’ll be taken into account when the debt payment plan is formed, giving you longer to pay back that debt too. Chapter 13 bankruptcy also reflects better on your credit report. It shows that you’re not one of these cut and run people, and that you’re prepared to stay and try and pay off the debts you’ve built up.

Home Loan Modification and the Making Home Affordable Program

The following is a list of the current Home Loan Modification options offered under the MHA plan (taken from www.makinghomeaffordable.gov): Home Affordable Modification Program SM (HAMPSM), Principal Reduction Alternative SM (PRA), Second Lien Modification Program (2MP), FHA Home Affordable Modification Program (FHA-HAMP), USDA’s Special Loan Servicing, Veteran’s Affairs Home Affordable Modification (VA-HAMP), Home Affordable Foreclosure Alternatives Program (HAFA), Second Lien Modification Program for Federal Housing Administration Loans (FHA-2LP), Home Affordable Refinance Program (HARP), FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance), Home Affordable Unemployment Program (UP), Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF)