One of the best elements of a Chapter 13 bankruptcy is a filer’s ability to negotiate with creditors. In addition to working out a repayment plan that may reduce monthly obligations to unsecured creditors, filers are also in a position to seek modifications from the lenders who provided their secured loans, such as car loans and mortgages.
Chapter 13 bankruptcy can be beneficial for those struggling to pay their mortgages who feel concerned about foreclosure proceedings. Requesting one of the mortgage modifications below could help a homeowner avoid foreclosure and regain control of their finances.
1. Altering a mortgage structure
People who struggle to qualify for a traditional 30-year mortgage might seek out an alternate financial instrument. Adjustable-rate mortgages and balloon mortgages are less common than they were a few decades ago, but they are still an option. People can convert an unsustainable mortgage to a fixed-rate 30-year or 15-year mortgage.
2. Locking in a better rate
Mortgage rates fluctuate, and the amount of interest paid can drastically alter the total cost of monthly mortgage payments. Filers may be able to lock in the current rate at the time of their modification negotiations, which could reduce what they pay each month and protect them from future fluctuations.
3. Increasing the repayment period
If a homeowner missed multiple payments or if their monthly payment is now so high that they cannot afford it, extending the repayment timeline can be a viable solution. Homeowners can move missed payments to the end of the repayment cycle or decrease monthly payments by extending how long the mortgage lasts.
Working with a bankruptcy attorney can help people maximize the benefits of a Chapter 13 filing. Mortgage modifications can be helpful for those trying to protect their homes despite their current financial struggles.