When debtors are underwater on their mortgages or behind on other monthly payments, Chapter 13 bankruptcy can create beneficial options. Chapter 13 bankruptcy is sometimes referred to as a “debt restructuring plan”, but it has many benefits some people might be unaware of. For people in the right situation, Chapter 13 can save mortgages. Let’s use a hypothetical example to explain some of these “hidden benefits.” How Chapter 13 Bankruptcy Can Save Underwater Mortgages Jack and Amy are a young couple receiving foreclosure threats from creditors after falling behind on mortgage payments. The couple also took out a second mortgage worth $50,000 to help pay for other bills and debts. After discussing their disastrous financial situation, they decide to get help. Within a few days, the couple meets with a local bankruptcy attorney to go over possible options for saving their home and finances. Given the specifics of their financial…
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Last week we wrote about the struggle for older homeowners who are facing foreclosures in high numbers, but a new report from The Wall Street Journal suggests housing problems are affecting a much wider demographic. According to the report, banks across the country could face billions in losses because homeowners are falling behind on home equity lines of credit. Home equity lines of credit, also known as HELOCs, are when homeowners borrow against the equity they have invested in their homes. HELOCs become more popular during a healthy housing market when real estate prices are higher. For years, borrowers will only have to worry about interest payments. However, payments on interest alone do not reduce the principal balance of HELOCs. Once the interest-only period ends, homeowners can find themselves owing payments on both the principal balance and the interest. This can add up to hundreds of dollars more in payments…
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Americans over the age of 50 are having difficulty paying their mortgages, leading to millions of foreclosures. According to the AARP, between 2007 and 2011, 1.5 million Americans aged 50 and older faced foreclosures and lost their homes. Many older homeowners have attempted to refinance their mortgages to pay down other debts, only to see the original balances swell two-fold. For example, a 70-year-old California man refinanced his mortgage to invest in other finances, but in a short amount of time, his $330,000 mortgage more than doubled to $680,000. Instead of offering the man a modified mortgage, the bank foreclosed and he lost the home he had lived in for more than 20 years. Older homeowners can also face problems such as losing jobs or becoming ill. In some cases, banks may refuse to modify the terms of mortgages, and older homeowners must turn to their children, charities or retirement…
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