Under Chapter 7, the following options are available to the debtor:
1) keep the residence, ""reaffirm"" the mortgage, and continue making regular payments; or 2) abandon the property.
2) Relinquish the property to the creditor and satisfy all remaining mortgage obligations.
When a debtor """"reaffirms"""" a debt, he agrees to continue to be liable for the debt and effectively excludes it from his bankruptcy proceeding. The debtor must execute a standard """"reaffirmation agreement"""" to reaffirm a debt.
To reaffirm a mortgage, the debtor must (a) be current on mortgage payments, (b) bring the mortgage current within a couple of weeks after filing bankruptcy, or © negotiate a repayment agreement or loan modification with the lender prior to or after filing bankruptcy. If the mortgage is delinquent, the debtor cannot keep the home under Chapter 7 unless he negotiates a repayment plan with the lender. If the mortgage is delinquent when a debtor files for Chapter 7 bankruptcy and he does not bring it current or reach an arrangement with the lender, the lender may file a """"motion for relief from the automatic stay"""" requesting the bankruptcy court's permission to begin or continue a foreclosure proceeding.
Under Chapter 13, the following options are available to the debtor:
1) continue to own the property and make regular mortgage payments to the lender. If the mortgage is delinquent when the Chapter 13 petition is filed, the debtor has up to 5 years (60 months) to bring it current through a repayment plan. The """"past due"""" or """"arrearage"""" amount may be divided into a maximum of sixty equal monthly payments that must be paid to a bankruptcy trustee; or
2) """"surrender"""" the home to the creditor and release all or the majority of the debtor's mortgage obligation.
If the debtor falls behind on regular or """"arrearage"""" payments during the bankruptcy proceeding, the bankruptcy court may either grant permission for the mortgage lender to initiate or continue a foreclosure proceeding on the property, or dismiss the bankruptcy proceeding entirely.
The bankruptcy court has no legal authority to modify a mortgage on a primary residence and, therefore, cannot reduce the regular payment amount or interest rate as specified in the mortgage documents, except in extremely unusual circumstances. Chapter 13 enables the debtor to reduce the interest rate to the market rate if the property is not the debtor's primary residence. Certain mortgages with a """"balloon payment"""" can be extended for an additional 5 years at a reduced interest rate.
Helping Families Save Their Homes in Bankruptcy Act) seeks to amend the U.S. Bankruptcy Code so that certain mortgages on primary residences may be modified in Chapter 13 proceedings by reducing the principal balance to the property's fair market value. The proposed legislation would also permit the modification of adjustable-rate mortgages to affordable fixed-rate mortgages.
" - https://www.affordablecebu.com/