While job market has begun to show some signs of life and home values have improved, the mortgage crisis and the resulting foreclosure debacle, has caused tremendous damage for workers and homeowners. While foreclosures have fallen from the crisis levels, they have not disappeared. And much like the job market, the most important index of foreclosures is the personal. What matters most is whether your home is involved in one.
If you have fallen behind on your bills, due to job loss, divorce, medical problems or some other crisis, you could be in danger of a foreclosure. Some mortgage documents allow a lender to accelerate a loan after a single missed payment, meaning you could owe the entire outstanding balance on your mortgage loan.
If this has happened, you may need to consult with a bankruptcy attorney. If your lender begins foreclosure proceedings, a bankruptcy may be the only viable way to stop the foreclosure and prevent the loss of your home.
When you are discussing your bankruptcy, you need to determine if you can afford to keep your home or if you simply do not have sufficient income to continue your mortgage payments.
Even in a Chapter 13 bankruptcy, you cannot "cram down" a home mortgage to the current market price of the property. Because of this, you have to review your finances and develop a budget that will enable you to continue making your mortgage payments for the life of your loan obligation.
Determining your budget can be a complex calculation and you need to add up all of your necessary living expenses and all of your debts. The amount of secured and unsecured debt you have and your living expenses will all be factored into your potential budget to determine what your plan payments may be.
Next time, we will look at how a Chapter 13 can help and the circumstance where you decide to walk away from your home and your mortgage loan.