Chapter 13 Bankruptcy and My Mortgage in New York City
For people in New York City that are behind on their mortgage and have no way to catch up on the payments Chapter 13 bankruptcy is usually the best way to save a home. Unlike a Chapter 7 filing, in a Chapter 13 you will be required to repay at least a portion of your debts over time through a court monitored repayment
plan. Chapter 13 allows people that are behind on their mortgage to catch up on the late payments over a 3-5 year repayment plan. You will need to start making the regular monthly payments again, but the arrears that have built up can be addressed over a longer period of time. These payments will now be easier to afford as well since most of your toxic debts, like medical bills, credit card payments and personal loans will be eliminated in the Chapter 13 process. Chapter 13 is also known as the “wage earners plan” meaning that in order to qualify you will need to be making at least enough money to meet the monthly terms of your plan. As long as you make all the payments you will avoid foreclosure, keep your home, and eliminate your other debts as well.
Our clients in New York City are also very fortunate because both the SDNY (Southern District New York) and the EDNY (Eastern District New York) offer foreclosure mediation and loss mitigation as part of the bankruptcy process. These jurisdictions are among only a handful of jurisdictions in the country that include foreclosure prevention programs as a part of the bankruptcy process. These programs are mandated by the bankruptcy court so the lender is forced to work with the homeowner on an alternative to bankruptcy. The programs do not guarantee a modification, but lenders cannot drag their feet or delay the process as they are known to do outside of bankruptcy court.
Payments towards second and third mortgages can also be eliminated through Chapter 13 bankruptcy. Your first mortgage is secured by the entire value of your home, and if the value of your home has dropped then you no longer have any equity in which to secure later mortgages. This is often the case for people needing bankruptcy protection in New York City. Most of our clients are able to “strip off” second and third mortgages which essentially puts these debts in with your other unsecured debts in your bankruptcy estate. Unsecured debts are given the last priority in bankruptcy and rarely paid in full. In most Chapter 13 cases our clients will repay their unsecured debt at pennies on the dollar and sometimes do not have to repay the debt at all.
If you are already being foreclosed upon realize that Chapter 13 can stop a foreclosure immediately, in less than a day in most cases. With any bankruptcy filing the “automatic stay” provision instantly goes into effect and stops any and all collection efforts against you for the duration of your case including foreclosure. At this point your 3-5 year plan is negotiated and confirmed and your lender must adhere to the new payment terms laid out by the bankruptcy court. Unless you miss a plan payment your lender will be unable to continue the foreclosure proceedings.
Saving a home is one of the primary reasons people file bankruptcy in New York City. New Yorkers are lucky to reside in one of the very few court districts in the country with specific programs combining bankruptcy with loan modifications. Chapter 13 can address mortgage troubles in many ways, but you need to be working with the right attorney. If you live in New York City and are having trouble making your mortgage payments please contact the Law Offices of William Waldner online or at 212. 244.2882 to arrange a free consultation today. We only practice bankruptcy law and a have a 99% Chapter 7 bankruptcy discharge record in New York City as of 8/31/16.
**** DISCLAIMER: This article is intended for educational purposes only. By reading no attorney-client relationship has been created. Prior results do not guarantee a similar result for future clients.