Long Island & NYC
Bankruptcy Reorganization Lawyer

In a traditional or “catch-up” plan, you cure the mortgage default by paying the accumulated arrears in equal installments over the life of the plan, while simultaneously resuming your regular monthly mortgage payments going forward. At the end of the plan you are fully current, and the original loan continues on its original terms. This is the classic use of Chapter 13 to reinstate a mortgage and defeat a foreclosure without needing the lender to agree to any new terms.

A loss-mitigation plan combines the protection of the bankruptcy case with a negotiated modification of the loan itself. Many bankruptcy courts have a formal loss-mitigation program that brings you and the lender to the table, under court supervision, to pursue a modification of the interest rate, term, or principal while the case is pending. If a modification is approved, the plan is built around the new, modified payment — often a better long-term outcome than simply catching up on the old terms when the original payment was never affordable to begin with.

Not every case ends in keeping the property. When retention is not realistic, a reorganization plan can also provide an orderly framework to sell the home — or to complete a short sale with the lender’s cooperation — on your timetable rather than at a forced foreclosure auction. This preserves equity where it exists, can reduce or resolve a potential deficiency, and lets you transition on your own terms while the automatic stay keeps the foreclosure at bay.