Mortgage companies were usually willing to work with debtors during COVID regarding mortgage payments when debtors weren’t able to pay, by allowing them to skip mortgage payment for six months or more. After the deferment period, the debtor would have to call back and try to make payment arrangements. When that program ended, debtors would call back and be told the program was over and they are now responsible for every payment missed. For many people, this created serious debt.
If a person is unable to make payments on a mortgage, their best option is to work with the mortgage company and try to do a loan modification. At the mortgage company’s discretion, they could put those payments at the end of the mortgage. The debtor is then responsible for paying interest on the deferred payments for the remainder of the years on that loan. Another type of modification is to place the arrears due in a subordinate mortgage that attaches behind the first mortgage, or, the arrears to the current balance of the loan. With interest rates currently on the rise, it is unlikely that loan modifications reduce mortgage interest rates. They can reduce monthly payments by extending the length of the loan, but this can be costly. For example, who wants to pay a mortgage for 45 years? You'll pay four times what you borrowed in interest. In a new mortgage with a $1000 payment, $990 goes to interest and $10 goes to principal. While a reduced monthly payment may help with the budget, in the long run you are giving the mortgage company more money.
How Can Someone Who Is In Dire Financial Straits Afford To File A Bankruptcy?
Most bankruptcy attorneys do not charge for consultation. In most cases, your financial background and financial history can be given and analyzed in about an hour. In consumer cases, that's enough information to determine your options for Chapter 7 versus Chapter 13. There is no fee for the consultation.
How Does Someone Pay Their Attorney’s Fee In A Chapter 13 Bankruptcy?
Attorney fees are set by the local court. Bankruptcy judges set the “no look” fee amount that is allowed to be paid through the Chapter 13 plan. We work up a payment plan that allows you to catch up on house payments, sometimes reduce car payments, reduce interest rates, and pay the attorney fees at the same time. Attorney fees average about $65 a month on a 5-year plan and are included in your total monthly payment to the Chapter 13 trustee. The only thing you have to come up with is the cost for your credit report and the court costs, which together run about $365 for a single filer. This initial payment (along with a lot of other documentation) can file the Chapter 13 petition. Exact costs will vary, of course, depending on the case. But this gets you started and gets all creditors off your back. Payments on your Chapter 13 plan start 30 days after filing.
Does A Chapter 13 Bankruptcy Help In Catching Up On Payments For Secured Debts As Well As Discharging Unsecured Debts?
Most of our cases are what we call zero percent Chapter 13 cases or zero percent plans. That means we deal with the creditors that you have to keep – or that you want to keep -- so that you can keep your house. We deal with mortgages, car notes, furniture payments, and sometimes past due taxes for up to three years. We can stop interest and late fees on those and wrap them into a 5-year plan.
Zero percent plans mean that your credit card debt, your medical bills, and personal loans that are unsecured will be discharged upon completion of the plan and entry of discharge. You don’t have to pay them. You have one monthly payment that deals with all your creditors that require payment. The rest of your paycheck is available for paying your other bills like rent, utilities, or buying groceries or clothes for the kids, whatever it is.
Do I Have to Give Up Any Assets that are Secured by Debt Such as a Car or a Home in a Chapter 13 Bankruptcy?
No. The purpose of a Chapter 13 is to keep all of your assets.
When you file bankruptcy, you create what’s called a bankruptcy estate. We meet with you to gather the value of your assets, and you generally don’t need appraisals. We double-check tax values and resale values to get the true value of assets, to make sure nothing becomes an issue when we file bankruptcy. For example, if your uncle died and left you $100,000 and you bought a new Chevrolet Corvette with cash, free and clear, that would be an issue when trying to file bankruptcy, Chapter 7 or Chapter 13. But for most people who own cars worth $10,000 or $20,000, often with a lien on them, it's not an issue. Up to $5000 automobile equity is exempt in the State of Georgia.
There is also a $10,000 wildcard that we can exempt whenever we want. That means you can have $10,000 cash sitting in the bank and still qualify for a Chapter 7 bankruptcy.