Bankruptcy

Bankruptcy may be an option for you if you do not expect to obtain additional funds in the near future, or, if you have very large credit card or other unsecured debts which, if you were not required to make payments on them, would allow you to have enough money to make your mortgage payments.

Bankruptcy should only be used as a last resort, however, because there are significant drawbacks to it. For one, the bankruptcy trustee and the courts take control of your property and can make decisions about your property.

Secondly, there is a large negative effect on your credit report. Finally, although bankruptcy may save your home temporarily, if you do not obtain relief from other debts or increase your income you will most likely be unable to make your mortgage payments.

• Stay foreclosure proceedings
• Deaccelerate loan and cure defaults
• Avoid judicial liens
• Strip down mortgages by modifying loan terms
• Strip off “unsecured” mortgages
• Bring predatory lending claims
• Deal with other debt issues

General rule
Bankruptcy generally permits modification of secured claims in chapter 13. 11 U.S.C. § 1322(b)(2)

Exception
Claims secured only by real property that is the debtor’s principal residence.