With rising interest rates, banks are always looking for a way to get rid of low-interest mortgages. After Covid, banks received incentives from the government to modify mortgages. We helped many homeowners accomplish modifications, through “loss mitigation” in foreclosure court and in bankruptcy courts. Those days are over.
But one tool is still available: using Chapter 13 bankruptcy to cure arrears. We can take back payments and roll them into a single obligation, payable, without interest, over 5 years to a Chapter 13 Bankruptcy Trustee. As a practical matter, if you are behind more than one year, this type of plan may not work, because the payment to the Trustee may be too high: you must make your regular mortgage payment to the bank (yes, they must accept the payments after you file for bankruptcy) PLUS you must make the arrears payment to the Trustee. With more than a year of arrears, payment of that amount over 60 months to the Trustee might be more than you can afford, on top of your regular payment to the bank. If that is the case, you could always sell the house in a private sale while you are under bankruptcy protection, receiving a better price than a foreclosure auction would yield, to preserve some equity for you to keep.
Another alternative is to have a family member help you make the Trustee payments, while you continue to make the regular mortgage payments to the bank. Every case is unique and we can help you stabilize your life, and avoid the stress of a pending foreclosure sale. Remember that from the time you receive a foreclosure summons until the actual foreclosure sale could be a year or more.
The thing to remember is to seek the assistance of an experienced bankruptcy lawyer as soon as you have a problem rather than wait until it becomes an emergency.
Chapter 13 is unique and most bankruptcy lawyers are not experts in this type of bankruptcy reorganization. At Corash & Hollender we have been using Chapter 13 for 48 years to help homeowners manage unanticipated financial changes. There is no charge for the initial meeting, whether by phone, in-person, or by Zoom. Let us help you develop a realistic strategy to manage your personal situation.
Paul Hollender
Staten Island’s only Board-Certified Bankruptcy Lawyer
15 years listed in Super Lawyers Directory
Avvo Rating 10 out of 10
48 years specialization in Bankruptcy Law
1200 South Avenue, Suite 201, Staten Island, NY 10314
718-442-4424
[email protected]