By Mike Appleton, Guest Blogger
As it did for many people, the current recession produced serious financial difficulties for William and Mary Hoagland. So they did what thousands of other families do each year and filed a petition for relief under Chapter 13 of the Bankruptcy Code. Chapter 13 does for individuals what Chapter 11 does for corporations; it enables a family to keep its property and pay all or most of its debts over a period to time under court protection.
Chapter 13 even provides a method for reducing or eliminating secured debt in some cases. For example, if you have a second mortgage on your home, and your home’s value does not exceed the value of the first mortgage, the lien of the second mortgage can be “stripped” in a process known as “cramdown,” converting the holder of the second mortgage into an unsecured creditor. The problem is that cramdown is not available for a residential first mortgage, regardless of how far a homeowner is underwater. Chapter 13 can provide breathing space to catch up with arrearages on a first mortgage, but if you want to keep your home, the first mortgage will have to be honored according to its terms, unless the lender will agree to a modification. In the case of Mr. and Mrs. Hoagland, a modification agreement with Bank of America may have enabled them to satisfy a $227,000.00 first mortgage in slightly less than two years.
Continue reading “Modify This: How To Pay Off Your Mortgage In Two Years” →