Chapter 13 bankruptcy is often used to save a home or investment property from foreclosure. Generally upon the filing of a chapter 13 case, foreclosure cases are generally stopped and a person is given the opportunity to propose a chapter 13 plan to save their home from foreclosure.
Under a chapter 13 plan, you may propose to catch up their mortgage payments over a period of up to 60 months. For example, if a person is behind $10,000 in payments and their regular mortgage payment is $850.00, they would pay the mortgage lender $166.67/mo. plus their regular mortgage of $850.00 for a total of $1,016.67.
You may pursue a mortgage modification during a chapter 13 case under the Bankruptcy Court’s “Mortgage Modification Mediation” (MMM) program. The MMM program provides an opportunity for the homeowner and mortgage lender to communicate under the supervision of the Bankruptcy Court and to explore modification opportunities.
Avoidance of Junior Mortgage
Under some circumstances, some junior (i.e. second or third mortgages) may be partially or wholly avoided if the value of the involved real estate does not exceed the amount owed on the first mortgage. For example, if the real estate has a value of $100,000.00 and the payoff of the first mortgage is $110,000.00, any junior mortgage may be partially or wholly avoided.