Chapter 13 bankruptcy in Long Island provides relief to debtors who make too much to qualify for Chapter 7 bankruptcy.  Filing Chapter 13 can help you to reduce many types of debt obligations and can help you to make your monthly debt payments much more manageable. However, filing Chapter 13 is not necessarily going to solve problems with mortgage debt in all cases.
Since a mortgage is a secured debt, bankruptcy does not allow you to stop making payments or even reduce your loan balance if you wish to keep your home. You will need to keep paying the mortgage bills, and get current if you are behind, in order to be able to file Chapter 13 and retain your residence.  However, there are some exceptions to this general rule and you may be able to use the bankruptcy to modify your mortgage loan.  Ronald D. Weiss, PC can help you to understand your options and to make informed choices about protecting your house during a Long Island bankruptcy proceeding.

Modify a Mortgage with a Chapter 13 Bankruptcy in Long Island

Chapter 13 requires the creation of a repayment agreement approved by creditors. The agreement generally spans three to five years. When calculating the amount to be paid to creditors as part of the agreement, the debtor generally will need to continue to make mortgage payments in full to the lender.
Second mortgages and other non-primary mortgages, however, may be modified under certain limited circumstances. If your house is worth only enough to pay back your first mortgage (or even less), then a second mortgage lender would not be able to recover unpaid mortgage payments by forcing a sale of the property. Only the first mortgager would get paid under these circumstances when a buyer owes more than the worth of the home.
Since a second mortgage holder doesn’t really have a secured interest in the home if he couldn’t foreclose and get repaid, the second mortgage debt could potentially be reclassified as unsecured and treated as such for the purposes of the repayment plan. This would mean a homeowner could sometimes keep his home, even without fully repaying a second mortgage.
Outside of these situations, the bankruptcy code is not going to force modification. However, filing for bankruptcy results in the creation of an automatic stay, which means that collection activities (including foreclosure) must stall at least temporarily. During the time when the mortgage lender is unable to move forward and foreclose, you may be able to save your home by working with the lender directly to help explore solutions that would let you keep your home such as mortgage modification under the Making Home Affordable Program.
Ronald D. WEiss, PC can assist you in understanding options for modifying your mortgage while filing Chapter 13 bankruptcy in Long Island. Call today to speak with a member of our legal team and learn more.
To learn more, please download our free second mortage with chapter 13 in Long Island report here.