Mortgage Bankruptcy : Understanding Before You Fail Out of Bankruptcy
Mortgage bankruptcy refers to the 'Conyers Bill' which was enacted by legislation in 2007. The mortgage bankruptcy bill is highly controversial because it modified the new bankruptcy laws which took effect in 2005.
The mortgage bankruptcy bill requires borrowers to provide evidence they are incapable of obtaining the financial means to become current on delinquent mortgage payments to stop foreclosure.
The primary purpose of the mortgage bankruptcy bill is to allow homeowners the opportunity to retain ownership of their real estate in the event of personal bankruptcy. In a nutshell, the Conyers Bill provides bankruptcy courts with the ability to alter terms of existing mortgages for the benefit of the homeowner.
Terms which can be altered through the mortgage bankruptcy bill include reduced interest rates, elimination of excessive fees, and the reduction of the principal mortgage balance to reflect an accurate market value of the real estate.
These changes provide the homeowner with the opportunity to regain control of their finances and become current on their mortgage note. As long as the borrower can adhere to their mortgage obligations, lenders can recoup their losses while avoiding foreclosure proceedings.
The mortgage bankruptcy bill is only applicable for borrowers who obtained mortgages through subprime or non-traditional loans after January 1, 2000 and later filed for Chapter 13 bankruptcy protection.
Chapter 13 bankruptcy provides debt relief through restructuring debts and the creation of a repayment plan. Debtors must adhere to the repayment plan for a period of three to five years. During this time, debtors are prohibited from incurring new debts without approval from the Trustee. Through this restructure of debt, bankruptcy courts can control the terms to ensure the interest of both borrowers and creditors are protected.
The mortgage bankruptcy bill provides an extra layer of protection for homeowners. However, if the debtor fails out of bankruptcy, the mortgage lender can petition the bankruptcy court and request the bankruptcy be dismissed.
If the judge dismisses the bankruptcy, foreclosure proceedings can commence in a matter of days. Therefore, it is imperative to submit Chapter 13 payments in a timely fashion and adhere to terms outlined in the bankruptcy proceedings.
Anyone considering personal bankruptcy should obtain counsel from a qualified bankruptcy attorney. Bankruptcy has far-reaching effects and can cause tremendous financial burden in the long run. Therefore, experts recommend seeking out bankruptcy alternatives such as debt consolidation, debt settlement or credit counseling.
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Published on January 02, 2009 at 04:54 PM