Real estate markets have shifted dramatically in the last few years. Home prices appreciated by a staggering amount over the last decade. Buyers who may have acquired their homes in the last few years might suddenly find themselves underwater as markets begin to correct.
Being underwater on a mortgage is a stressful experience. It means that property owners owe more on their mortgages than the home is currently worth. For those concerned about their mortgage debts and protecting their homeownership, filing for personal bankruptcy could be an important step forward.
How can bankruptcy help?
Bankruptcy can benefit those struggling with their mortgages by providing temporary relief from collection efforts. The automatic stay provided when an individual files can prevent their mortgage lender from foreclosing until they complete the bankruptcy process.
Additionally, homeowners have an opportunity to negotiate with their lender, especially in a Chapter 13 bankruptcy. It may be possible to modify an underwater mortgage. A lender might agree to certain adjustments to the loan terms that make the mortgage more sustainable.
They could agree to lock in a lower interest rate or extend the timeline for repayment. They might allow homeowners who have missed payments to move those payments to the end of the repayment schedule instead of needing to acquire funds for multiple payments at once to bring the mortgage back into good standing.
Finally, the elimination of other debts through a discharge can make it easier for homeowners to pay their mortgage monthly, even if they are underwater on the property. Bankruptcy can be helpful for those who struggle to pay their mortgages and other bills every month.
Discussing mortgage concerns and bankruptcy options with a skilled legal team can help those worried about their finances plan their next moves. Homeowners who are underwater on their mortgages do not necessarily have to give up their homes to improve their financial circumstances.
