Can Bankruptcy Reduce My Mortgage Payments?

You may want nothing more but to make it right with your mortgage lender and make your monthly payments timely and in full. However, you may be struggling with the high interest rates or overall the amount due per month. What’s worse, your mortgage lender may be unwilling to renegotiate with you. This may leave you no choice but to consider a bankruptcy declaration. But you may be unsure if this can even save you. Well, follow along to find out whether bankruptcy can work to reduce your mortgage payments and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you keep up with what you owe.

Can Chapter 7 bankruptcy work to reduce my mortgage payments?

First off, you must understand that your mortgage loan is a secured debt. Meaning, your mortgage lender may place a lien on your home and use it as collateral if you fail to pay your monthly payments. Well, by filing for Chapter 7 bankruptcy, you may eliminate your obligation to finish paying off your mortgage loan. However, your bankruptcy cannot and will not get rid of the lien on your home. So, if you do not make your mortgage payments during or after bankruptcy, it will not be long until your lender takes foreclosure action against your home, sells it at auction, and uses these funds to compensate for the remainder of your loan.

Overall, your Chapter 7 bankruptcy may not give you the option to reduce your monthly mortgage payments. However, since it discharges your other unsecured debts, it may free up funds to use towards your mortgage loan. In this way, you may stay current with your payments and keep your home during and after your case.

How can Chapter 13 bankruptcy help with my mortgage payments?

Handling your mortgage payments may be a little more streamlined with a Chapter 13 bankruptcy filing. This is because there is a mandatory, court-ordered, three- to five-year repayment plan for all your outstanding debts. Through this plan, you may reduce the amount owed to your outstanding lenders each month in a way that is more manageable and realistic. Notably, this plan may include your mortgage lender.

In addition, Chapter 13 bankruptcy allows for the option of lien stripping. With this, your junior liens may get categorized as unsecured debt. Then, this unsecured debt may be discharged after your bankruptcy case. Of note, the second and third mortgages for your primary residence may be considered junior liens. However, this may only work if the value of your primary residence is less than what you owe on the principal mortgage. Plus, you may still be expected to pay off your principal mortgage in full.

In conclusion, before entering the legal arena, you must retain the services of a talented Louisville, Kentucky consumer bankruptcy lawyer. Reach out to Schwartz Bankruptcy Law Center today.