Saving Home from Foreclosure | Chapter 13 Can be Lucky

2021 update: There are always some people who fall behind on mortgage payments, and need help saving their home from foreclosure. I’ve been doing just that for two decades. The following predicting a housing crisis was written in July 2006. It’s just as true with the coronavirus aftermath today as it was then.

In August 2005, I wrote in this space that there was a perfect storm brewing for the average consumer.  Since then, the bankruptcy laws have changes (in the name of reform). Indeed, it is harder — but not impossible — to get a fresh start.

One area where we can get into debt trouble and feel a financial squeeze is with regard to mortgage payments.  The past few years, property values have been soaring here in Southern California.  This has led to many people to refinance their homes and take “cash out” — in essence using their house as an ATM.  The result of this is that it leads to less equity and a higher mortgage payment.

What happens if these homes with tapped out equity drop in value?  We’re conditioned to believe that property values only go up Up UP! in Southern California.  However, in 1989-1991, the real estate market peaked, leading to dropping property values.

The result is that many people were “upside down” in their homes, meaning that that they owed more than it was worth.  We expect this from a car loan since a car almost always depreciates faster than we can pay it off.  But with a house?  Yikes.

Saving Home From Foreclosure: Affordably

Some experts believe that history may be repeating itself. Recently, economics experts are looking at reliable benchmarks like Price-to-Income Ratios and Price-to-Rent ratios. They note that home value are much higher than normal levels.  Even houses in your neighborhood are no longer selling within the same week they’re listed with someone offering $10,000 over the listing price.

Instead, we’re seeing “Reduced!” signs nailed onto those For Sale signs, and reading advice like that in the Los Angeles Daily News suggesting that you list your home in the lower 25% as related to the comparable homes in the neighborhood.  Is there a real estate bubble which will shortly burst? Or, is the housing market temporarily resting before it continues upwards and onwards?  No one knows for sure. But if it does, bankruptcy can save a house from foreclosure.

If you find yourself in the awful situation where you fall one or two payments behind on the mortgage, there is still hope.  A Chapter 13 bankruptcy  might be the solution.  This option allows you to get some “breathing room,” stop the collection calls and headaches, and even stop a foreclosure.  People can fall a few months behind, they want to catch up but the lender won’t accept anything but a massive lump sum payment that the troubled homeowner doesn’t have.

How Chapter 13 helps save your home

A Chapter 13 case can allow you to catch your breath as you demonstrate how you will catch up on your past due mortgage payments, but on a schedule you can actually stick to and afford.  This very helpful type of bankruptcy allows you to reorganize your debt and save your house.

Even for people who don’t have a home, a Chapter 13 bankruptcy can provide a light at the end of the tunnel.  It can provide a way to pay what you can afford, and in return, stop lawsuits, wage garnishments, collection headaches and yes, even foreclosures. And then, yes, you can be debt-free in three or five years.  That time will tick off the calendar either way… why not be out of debt in that span?

Normally, when you’re late on house payments, the bank wants all of the arrearages (fancy word for lates) all at once. Maybe they’ll break it up into 3 payments, or 6. But if you owe $20,000, that’s not saving your house from foreclosure because it’s not doable. However, it’s often possible to take those same lates and break them up into 60 easier payments. This makes saving home from foreclosure more affordable.

READ MORE – Chapter 13 Bankruptcy – A Better Solution

In closing, it works

So, just because you’re a payment or three behind on that car or home, don’t lose faith.  There is a way to get some space and time to catch your breath.  You can be out of debt and most importantly, a way for saving home from foreclosure

Sometimes, bad things happen to good people.  We don’t intend for things to work out the way they do.  But when “life happens” and there is an unanticipated debt problem, when you’re ready to solve it then a Chapter 13 bankruptcy can be the solution to your problem.

Contact an experienced bankruptcy attorney now.