Congress responding to foreclosure – Loan Modifications in Chapter 13
Posted on Jan 6, 2009 in Bankruptcy, Chapter 13, Foreclosure - Saving Your Home
Too many homeowners are facing foreclosure in Illinois and Wisconsin. Chapter 7 bankruptcy won’t help you save your home if you can’t keep up your mortgage payments. Even Chapter 13 wage earner plans are not so great, especially if your house is worth much less than what you owe. But help is on the way. Congress is planning to amend chapter 13 of the Bankruptcy Code. And President-Elect Obama supports this legislation. This change will allow a homeowner to lower the amount due on your home mortgage to no more than the current value of your home. Any excess would be treated as an unsecured claim.
What does this mean? Suppose you have a house worth $200,000 today with a $150,000 first mortgage and a $100,000 second mortgage. As things stand now, in a Chapter 13 bankruptcy case, you’d have to pay the entire $150,000 first mortgage and the entire $100,000 second mortgage plus any arrearages to keep your house. You couldn’t do anything about the interest rates either.
Under the proposed law, you could reduce the second mortgage to $50,000. You might be able to reduce the interest rates on both mortgages. And the remaining $50,000 unsecured balance could be paid off under your chapter 13 plan over a period of up to 5 years. You probably would not have to pay the whole $50,000, but perhaps only a small percentage.
This is a very important change in the law. It would treat you just like any other property owner. So PLEASE, contact your Congressman and Senators TODAY. Tell them you want Chapter 13 amended to protect you and thousands of American homeowners just like you.