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Posted on in Home Mortgage

Mortgage delinquencies skyrocketed in April. One big reason: the pandemic CARES Act provided for extraordinary mortgage payment forbearance.

Epic Increase in Mortgage Delinquencies

The number of home mortgages that became delinquent in April was largest one-month increase in U.S. history. 1.6 million mortgages current in March were not paid in April, according to Black Knight, a mortgage data provider.

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Chapter 13 gives you valuable power to force your mortgage lender to be up front about how much you owe, and to efficiently dispute the amount.

Catching Up on Your Mortgage over Time

A Chapter 13 case gives you the power to catch up on your home mortgage(s) over an extended period. This “adjustment of debts” type of bankruptcy can give you up to 5 years to catch up.

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Summary

Do you have a second or third mortgage on your home? Imagine if you could stop paying that monthly mortgage payment. Imagine over the course of the next 3 to 5 years paying only as much as you could readily afford to pay on the balance of that mortgage. This is often only a small portion of the mortgage balance. Or, if over that time you could afford to pay nothing, you’d likely pay nothing on that mortgage balance. Then at the end of that time, whatever you couldn’t pay would get completely written off. That’s what happens in a second or third mortgage strip under Chapter 13 “adjustment of debts.”

Qualifying to Strip Your Second or Third Mortgage

The economic environment that is most likely to result in stripping mortgages is one of declining or static home prices. That’s not currently the situation in most parts of the country. Yet, given the huge potential advantages, it’s still worth looking to see if you qualify.

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Chapter 7 provides no mechanism to cure your mortgage. But Chapter 13 does provide a powerful, realistic, and practical way to do so.

Chapter 7 “Straight Bankruptcy” and Chapter 13 “Adjustment of Debts”

Chapter 7 and Chapter 13 are the two main consumer bankruptcy options.

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Bankruptcy frees up cash flow for your mortgage payments. Chapter 7 does so by writing off other debts. Chapter 13 does so more creatively.


Both Chapter 7 and Chapter 13 Improve Your Cash Flow

A Chapter 7 “straight bankruptcy” case would very likely quickly write off (“discharge”) many of your debts. For many people it discharges most of their debts, maybe even all of them except their home mortgage. That frees up cash flow so that you can better afford to pay your mortgage.

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