Bankruptcy Can Help Prevent Foreclosure in Certain Situations
One of the most common questions I get is whether or not bankruptcy will help a person keep their house from foreclosure. This is a common misconception that many people have about bankruptcy.
Many people believe that if they file for bankruptcy they’ll be able to keep their house without paying for it. Unfortunately, this is not true.
Chapter 13 Bankruptcy can help you to catch up with arrearages that you have on your house. Arrearages are mortgage payments that you have not paid for a period of time.
A chapter 13 bankruptcy can spread out the payments over a period of 3 or 5 years, thus relieving the need to make a one time lump sum payment (which is what most banks demand). However, the important aspect to consider is that you need to ALSO make the regular monthly payments on your mortgage. This is why bankruptcy can only help a few people in relation to foreclosure. Only a very few people are in a position to do this.
People usually get an arrearage because they are unable to afford their mortgage and asking them to pay the mortgage in addition to a portion of their arrearage is not a real possibility. However, if you are able to do so, bankruptcy can provide real relief and save your home from foreclosure.
Even if you are not able to pay your mortgage and any arrearages that you may have to keep your home on a long term basis, bankruptcy will at least delay the foreclosure process.
Another powerful remedy available in a chapter 13 bankruptcy is the ability to essentially wipe out your second mortgage. This is available if your home is worth less than what you owe on your first mortgage. In such situations, your second mortgage is considered completely unsecured. In Los Angeles County, you need to file a “LAM Motion” in order to get rid of the second mortgage but if you qualify, it can be done by a bankruptcy attorney.
If you are interested in learning more, contact a Pasadena bankruptcy attorney at MacLean Chung Law Firm. We have offices in Burbank, Pasadena, and Valencia, California. We offer free consultations and have regularly scheduled bankruptcy clinics for consumers. Call us today to get more information.