mortgage forbearance chapter 13

Mortgage Forbearance Is Coming To An End: Is Chapter 13 Right For You?

mortgage forbearance chapter 13

Mortgage payment forbearance provided a lifeline for millions of American homeowners during the most difficult months of the pandemic.

What Happens When The Forbearance Period Ends?

Under the CARES Act, homeowners with conventional, FHA, VA or USDA loans could request an initial loan forbearance for up to six months. They could also request a six-month extension, for up to one year of total forbearance.  Here’s the issue:  what happens when the forbearance period ends?  Depending on the lender, a homeowner may need to pay the entire forborne balance when the forbearance period ends.  Other lenders will allow the forborne balance to go to the end of the loan.

How Could Chapter 13 Help With My Forbearance?

Another option for the homeowner would be to consider filing a chapter 13 bankruptcy. This allows a homeowner up to five years to bring current missed payments as well as restructure other debt he or she may owe. So instead of having to make one huge payment, a homeowner could break up the payments over 60 months.

Here is an example outlining how this could work: If a homeowner accepted a 12-month forbearance on monthly payments of $2,000, then a chapter 13 plan can provide for the $24,000 in arrears to be paid over a 60-month period.  That works out to an extra $400 per month.

Additionally, if the homeowner has other obligations (past-due homeowners association dues, vehicle loans, credit card debt, tax debt, medical bills, student loans), they can be provided for and possibly discharged under chapter 13. The variable factors include the type of debt owed and the assets, debts, income and expenses of the debtor.

What If I Decide To Sell My Home?

If a homeowner decides to sell the residence during the pendency of the chapter 13 case, the plan can be modified to account for that change, or alternatively, the case can be converted to chapter 7 or dismissed.

If a homeowner seeks to sell the residence but needs time, a chapter 13 plan can include a liquidating provision which generally limits the monthly plan payment commitment in exchange for selling the property.

Remember, Guenther Miller Law Group offers free consultations to discuss your available options. Give us a call at 831-783-3440.

auto inflation bankruptcy

How Will Used Auto Prices Affect Bankruptcy?

auto inflation bankruptcyAccording to research firm J.D. Power, the average price of a preowned vehicle in the U.S. has exceeded $25,000 for the first time ever.

A Global Computer Chip Shortage

The climb began last year and experts do not see the trend ending any time soon. A global computer chip shortage has strained new-car inventories, leading more to shop the pre-owned market — leading to shrinking supplies and more demand.

At the same time, the average price for a new model climbed to $37,572 in April, up about 7 percent from a year earlier.

How does all this affect someone proceeding through bankruptcy?

Well, what normally is a depreciable asset has been appreciating, and current consumers are finding they have more equity in their vehicles.  But what happens if you cannot afford to make your payments on that appreciating asset?  Bankruptcy may be an option.

There are two main types of bankruptcy: Chapter 7, which liquidates some of your assets, and Chapter 13, which focuses on repaying debts. What happens to your car in bankruptcy depends both on the type of bankruptcy you file and how much equity you have in your vehicle.

Chapter 7 Bankruptcy

Under Chapter 7 bankruptcy, you can keep the car as long as you continue making the regular monthly payments to the lender.  In some cases, you can redeem the car, i.e., pay the lender what the car is worth.  (This only works if the value of the car is much less than the loan balance.) You can also try asking the lender to enter into a reaffirmation agreement and to include the missed payments in the new payment arrangement. However, your lender is under no obligation to modify your payment when you're behind.

Chapter 13 Bankruptcy

For most people who are behind on their car payments, Chapter 13 is the better option. In Chapter 13, you can rewrite the car loan to lower the interest rate and possibly lower the payments.

In some cases, you can reduce the amount you have to repay based on the current value of your car.  That's where the rising values for used cars can hurt you.  For example, if your car was worth $10,000 and you owed $15,000, you could file a Chapter 13 and offer to pay back $10,000 (the value of the car).  But today, that same car might be worth closer to $14,000.  If that's the case, you could still "save" $1,000 by offering to pay the loan through Chapter 13.  But as they say in the fine print, "your savings may vary."

To make sure, your best bet, if you are behind on your car payments, is to call us before your car is repossessed!

Find out where you stand and receive a detailed bankruptcy plan during these tumultuous times. Call Guenther Miller Law Group at 831-783-3440.