Bankruptcy and Saving Your Home

Georgia ranked fourth in United States for foreclosure or rule out rates during August 2011, according to the tracking firm RealtyTrac.

I meet daily with relinquish and despairing homeowners. Most of them are middle-class United States workers who have been suffering with the double-conjuration of the misleading mortgage modification processes and infrequent unemployment. They are expecting their government to stand up to move a step up and help them.

The mortgage modification programs remind me of Charlie Brown looking at Lucy holding a football for him to kick. Homeowners are being alleged for not presenting paperwork that was provided several times, being proposed unaffordable changes and modifications based on grossly miscalculated income, and finally not being offered any modification. Since HAMP regulations abide generally not accomplished and unenforced by the Administration, consumers have no competent or effective recourse or expedient when those regulations are generally ignored by the untrained and oblivious altered or modification staff of the mortgage servicers.

In 2009 legislation was introduced that would have help save hundreds of thousands of homes from foreclosure by allowing for court-supervised modification of home mortgages. This proposal was publicly endorsed by President Obama, but when it came to a vote, the Bankers called in their chips (from the Administration and both parties) and it failed.

I tell my clients “They are not your mortgage company, they are your landlord.” If the rent is to high, move. If you have just one mortgage on your home, the mortgage companies almost never pursue you, like on a auto repossession. They just put a foreclosure on your credit report and make a claim for the mortgage insurance. If you have more than one mortgage, just walking away, without filing bankruptcy, may not be an option.

There is one method that is available in limited situations known as lien stripping. A lien strip acknowledges a Chapter 13 debtor for application the power of the Bankruptcy Court to change a secured second mortgage or home equity line of credit into an unsecured loan or debt. Then the debt is paid pennies on the dollar through a chapter 13 plan.

In order to strip the second mortgage, the Debtor’s home must have an appraised value on the date of the Bankruptcy filing that is less than the first mortgage. That happens more often than you would think, especially in neighborhoods with foreclosures sales. Most homes in Austell that were purchased in the past few years with an 80% first mortgage and a 20% second will qualify. Also homeowners that obtained an Equity Line in the past few years may be able to strip it.

There are draw backs; Chapter 13 lien strips are expensive, even though the costs are paid in monthly installments over 60 months. Many Debtors tell me for what a lien strip cost they could move and file a chapter 7. Most of the time a complete bankruptcy (chapter 7) makes the most economic sense. But in cases of a homeowner that wants to keep THEIR house, for whatever reason, the extra cost is worth it. I have helped homeowners that have handicap modifications and home offices that would be cost prohibited in a rental house.

In order to get rid of your second you must complete your chapter 13. It can last for 60 monthly payments, that’s 5 years. If you make 59 payments, and cannot make the last payment, all your expense and efforts are lost.

If you have made up your mind to save your home, and could if you only had a first mortgage, call, I may be able to help.