How Can Chapter 13 Save My Indiana Home?

In many cases, homeowners can miss up to four installment payments before the bank begins foreclosure proceedings. But in other cases, the bank pulls the trigger after just two missed payments. Either way, things quickly go from bad to worse for Indiana homeowners.

An acceleration notice is usually part of the pre-foreclosure process. Basically, the bank demands the entire loan amount and refuses to accept partial payments. So, the owner gets further and further behind even if installment payments are still trickling in.

The last federal loan modification program, Home Affordable Refinance Program (HARP), ends on December 31, 2018. And, people with underwater mortgages (the loan amount exceeds the house value) usually cannot refinance. So, bankruptcy may be the only option. The good news is that bankruptcy is a very, very good option in these situations.

Some Short Term Bankruptcy Solutions in Indiana

Section 362 of the Bankruptcy Code prohibits all adverse action, including foreclosure. It takes effect immediately upon filing and, in most cases, lasts through the entire protected repayment period of a Chapter 13. So, as long as the debtor timely makes the debt consolidation payments, the mortgage company cannot so much as utter a protest.

This debt consolidation payment wraps up all the debtor’s secured debt delinquency into one package. The trustee calculates this payment based on what you can afford to pay, and not what the moneylenders demand that you pay at once.

Many times, there is a dispute as to the amount owed. For example, there may be some facts which signal predatory lending or mortgage fraud. If there is such a dispute, most Indiana bankruptcy judges refer these cases to mediation. In that forum, you have an experienced lawyer fighting for you. That setup evens the odds, because it’s very difficult to fight the bank by yourself and win.

The Cram-Down and Strip-Off in an Indiana Chapter 13

There is often a significant difference between the loan value and the fair market value. That’s especially common with things that depreciate quickly, like motor vehicles. Assume the debtor owes $10,000 on a car that’s only worth $5,000. If the debtor pays the lender $5,000 over the course of a Chapter 13, the debtor might own the car free and clear. Legally, the moneylender must forgive the remainder of the debt.

With regard to houses, cram-downs are not very common. Some houses depreciate quickly, but most do not. Moreover, if the debtor had $150,000 or so in cash to pay off a house note, the debtor probably would not have filed bankruptcy in the first place.

Strip-offs are rather common in Indiana Chapter 13 bankruptcies. Assume that the homeowner used an 80-20 mortgage to buy a $200,000 house that’s now only worth $180,000. The value of the home is not high enough to fully secure both loans. So, the junior $40,000 mortgage is now a $20,000 secured debt and a $20,000 unsecured debt. The unsecured portion is dischargeable. As a result, the homeowner could save hundreds of dollars a month once the bankruptcy ends.

Contact Knowledgeable Lawyers

There are some small nuances in bankruptcy that can make a big difference. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

investopedia.com/ask/answers/081516/how-many-mortgage-payments-can-i-miss-foreclosure.asp