Law Offices of Jennifer L. Holland
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HOMES AND RETIREMENT ARE NECESSARY FOR SURVIVAL.
Don’t threaten these assets because you are afraid of a bankruptcy
or bad credit. Consult an attorney first.
Foreclosures & Refinancing
The most common type of bankruptcy (Chapter 7) stops a foreclosure (in Alaska, if done before the date of foreclosure sale) but does so only temporarily.
A second type of bankruptcy (Chapter 13) not only stops the foreclosure but may provide a method by which you can pay back your late payments over three to five years. This assumes you have enough
income to keep up with the current payments and to pay some amount to the court on the back payments. To see if you qualify, consult with an attorney well before the foreclosure date.
Don't assume that your lender or mortgage company will rewrite the loan. If you are more than 2 or 3 months late, chances are the lender will not work with you or take payments. Try the lender first, but do not delay. Speak with a bankruptcy attorney if your efforts are not quickly successful.
REFINANCING YOUR HOME
TO AVOID A BANKRUPTCY
Please consult with a bankruptcy attorney before you try this approach! It may not be the best financial choice. Some things to consider:
1. The home equity loan will involve either rewriting your existing mortgage at a much higher interest rate or will involve a second mortgage at a very,very high interest rate.
2. A home equity loan is not eliminated in a bankruptcy. If you are unable to pay all of your debts and are forced to file a bankruptcy in the future, you will owe on either the higher interest rate mortgage or on both mortgages (if you received a second mortgage rather than a rewritten first mortgage). In either event, this debt is not eliminated. Of course, you can surrender your house and file bankruptcy...in that case, you will no longer be responsible personally for the home equity loan - but you have traded your home for consumer debt!
Likewise, do not borrow from retirement accounts without careful consideration first.
Forebearance & Modification Agreements
During the pandemic, mortgage companies began offering forbearance agreements where homeowners did not have to pay their mortgage for 6 months if they’d fallen on hard times.
Some people renewed their agreements for much longer than 6 months. While this was an excellent short-term solution for many people, for many others it just delayed the problem rather than solving it.
At the end of a forbearance, the mortgage has to be brought current. Most people have to look at options offered by their mortgage companies to keep their homes.
To avoid foreclosure, homeowners generally have the choices to:
1) Pay the back due amount in full and immediately begin regular mortgage payments; 2) Apply for a modification of your loan to roll the back payments to the end of the new loan and/or pay a modified amount going forward; or
3) Give your house back to the mortgage company without a formal foreclosure (deed in lieu). If youwant to keep your home and can’t qualify for the first two options, a Chapter 13 may be your
only option to keep your home. Modifying your loan does not prevent you from filing
bankruptcy, and a bankruptcy does not prohibit you from applying to modify your loan.
It’s important to discuss your complete financial picture with a bankruptcy attorney.