Now that prices have fallen so drastically, they are upside down on their mortgage, as the loan amount is significantly higher than the property's market value. Now that many of these loans are coming due, a large number of individuals are beginning to panic, pondering what will happen if they cannot or do not pay their mortgage. Depending on the individual's financial situation, bankruptcy may be an option. There are a few options that can assist people in various situations when filing for bankruptcy. Individuals with substantial unsecured debt, such as credit card debt, medical expenses, and payday loans, can benefit from Chapter 7 bankruptcy. In contrast, Chapter 13 bankruptcy is a potent tool that will prevent a foreclosure and enable the debtor to renegotiate their debts with their creditors.
If a person can afford to continue making payments and is current on their mortgage, there is no means for them to use bankruptcy as a way out. There is a strategic default option that entails ceasing all mortgage payments. It is impossible to predict what the bank will do once you cease making payments. They have the option of initiating a foreclosure on the property.
A short sale is another option if you want out of the property. In a short sale, the provisions must be approved by the lender. After certain short sales, numerous lenders will prosecute the debtor for the deficiency or simply file Form 1099C with the IRS, making the debtor liable for the income. It is always advisable to consult a bankruptcy counsel before making a decision of this nature, as it may affect the debtor's bankruptcy filing benefits.
If a person can afford their mortgage payment in the present day, don't hold your breath for the bank to foreclose. They are not currently foreclosing on properties because they are already saddled with thousands of residences they cannot sell. This has not been sufficient incentive for banks to offer loan modifications to underwater homeowners. Chapter 7 bankruptcy can halt a foreclosure, but in the majority of cases, the stay is only transient. If one wishes to modify their mortgage, Chapter 13 bankruptcy should be considered. Chapter 13 bankruptcy will attract the attention of your mortgage company. In many instances, if a debtor is upside down on their property and a second trust deed has been added, the court will permit the debtor to remove the second trust deed and make the debt unsecured. In many cases, this alone can help the delinquent afford the mortgage payment. If not, the bankruptcy attorney can negotiate with the debtor's creditors to retain the debtor's property within the debtor's means.""
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