Mortgages make homeownership accessible. People acquire financing to complete the biggest purchases of their lives and then accumulate equity when they make monthly payments, instead of simply sending money to a landlord.
Mortgages are usually for six figures or even more, and they typically impose a 30-year repayment period. What homeowners pay depends in part on the market in which they purchased and even the economy at the time of the purchase.
Sometimes, homeowners find themselves underwater after an acquisition. They paid more than the property is currently worth. A Chapter 13 bankruptcy could potentially help address an underwater mortgage.
Bankruptcy makes modifications accessible
It is possible to alter the terms of a mortgage if both parties sign an agreement. A mortgage modification could help a frustrated homeowner reduce their monthly payments by locking in a lower interest rate or increasing the repayment timeline.
Other changes to the mortgage could also make it easier for the homeowner to keep the loan in good standing. Although borrowers can propose a modification at any time, lenders have more of an incentive to cooperate with homeowners during the bankruptcy process.
During a Chapter 13 bankruptcy, the courts oversee the establishment of a repayment plan. Cooperating helps protect the lender’s interests. Those who are behind on payment or struggling to make them each month may benefit from filing.
Taking prompt action when a mortgage becomes unsustainable can help people protect their most valuable assets. A Chapter 13 bankruptcy can potentially help people avoid the loss of homeownership when they are underwater on a mortgage.