Save your Home. Stop Foreclosure. These words, blaring from billboards and bus benches, are the typical mantra of bankruptcy lawyers standing by to put you into the bankruptcy system, where, they suggest, they will be able to save the roof over your head.
The vehicle these lawyers employ is a form of bankruptcy known as Chapter 13. Putting you into Chapter 13 serves as an immediate shield from further legal proceedings. While there is nothing simple about filing a Chapter 13, understanding the fundamentals can help you decide whether it is worth your while to pay a visit to your friendly neighborhood Chapter 13 lawyer.
When can Chapter 13 actually help you to save your home? You have to do some basic math:
- Write down your normal mortgage payment…the number you would be paying if you were staying current.
- Find out from your lender the amount of the total arrearage…in other words, determine the dollar amount you would have to pay right now to become current.
- Divide the number in #2 by 60.
- Add together #1 and #3. Add 10% to that number.
The result is the” mortgage cure”…the number you will have to pay each month for the 5 years (60 months) that you are in a Chapter 13 bankruptcy, under what is known as a “Plan”. To have the court approve your plan, you will have to show that you have enough money coming into your household each month to pay the mortgage cure, and still have enough left to pay for your basics…food, gas, insurance, utilities, etc. If you don’t, then you may not want to invest in the lawyer’s fees, which typically range from $2500 to $3500.
If the math does not work and you are still desperate to save your home, there is still a chance that Chapter 13 might be used to save the day. You file your case, then participate in what is known as the Mortgage Modification Mediation Program. This is a tool that requires your lender to participate in negotiations with you, under the supervision of a certified mediator. You can seek a reduction in principal, a forbearance (delay) on payments, a reduced interest rate, or some combination.
You can see more about the MMM program at: MORTGAGE MODIFICATION MEDIATION PROGRAM PROCEDURES
Chapter 13 can be the answer to your prayers, but as in any industry, there are professionals who will take your money without doing their homework. If you seek a Chapter 13 consultation, make the lawyer show you the numbers.