Abuse of the Homeowner


In this article I explore how the mortgage industry abuses the homeowners before and then after a bankruptcy case is filed. Our homes are supposed to be our castles, yet if we are not careful, the mortgage companies can quickly dethrone us.

During these rough economic times, many of us can find ourselves facing financial difficulties at some point. It could be that there were unexpected medical bills, a business downturn or a loss of income. Sometimes, the mortgage “momentarily” takes a backseat to the emergencies in our life.

What we have seen practiced by some mortgage servicers is that, when a homeowner gets behind in payments, the servicer begins two processes aimed at protecting its interest in the property. On one hand, it may offer the owner an opportunity to refinance/restructure the note, and on the other hand, it may initiate foreclosure proceedings.

The difficulty for the homeowner is to understand that the loan servicer could be executing both processes in parallel. This confusion is due to misrepresentations or misunderstandings occurring during the frantic phone calls between the homeowner and the different service personnel in the servicer’s customer service department. The difficulty is made worse when the homeowner does not seek legal advice early in the process for a myriad of reasons, often involving pride in being able to handle one’s own problems.

Fortunate few, however, at some point before the foreclosure make themselves get legal advice that can save their homes. For others who try to work it out on their own, they sometimes learn after the fact that their homes were foreclosed on during the time that they were sending in the piles and piles of the paperwork required for refinancing, paperwork that the mortgage company conveniently loses.

Consulting with a bankruptcy attorney early in the process when a homeowner gets into financial distress can be beneficial more often than not. Bankruptcy attorneys can quickly develop insights into your situation and can plan actions to take so that an orderly bankruptcy process is undertaken. Most people do not like the stigma of filing for bankruptcy; however, those who truly consider all options will be more likely to come up with a better plan for getting a fresh start in life while keeping their home.

Review your cash flow situation months ahead if possible. However, if you foresee a negative cash flow situation, consider talking to a bankruptcy attorney prior to using up your savings and other resources that you and your family may need to meet your basic needs. The consultation is free and there may be other options. Until you sit down with an experienced attorney, you will not know if bankruptcy can help. Come see us.

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Can bankruptcy save my home from foreclosure?

Can bankruptcy save my home from foreclosure?

Under current bankruptcy laws, an individual or family may be able to stop foreclosure of their family home. Many families who are facing foreclosure find that either their mortgage company will not work with them to stop a foreclosure, or want a very large cash payment in order to modify their mortgages.

Many individuals and families are able to save their homes from foreclosure by filing a Chapter 13 bankruptcy, which is a debt reorganization under bankruptcy law. In most cases, filing Chapter 13 stops the foreclosure process, preventing eviction and giving the homeowner time to file a plan to reorganize debts. Without the looming threat of foreclosure and eviction, homeowners can work with their attorney to create a plan that allows them to affordably reorganize their debts and save their home.

Chapter 13 allows the homeowner to create a plan to repay the house payments that were missed prior to bankruptcy over three to five years. If the homeowner has fallen behind on property taxes, the property taxes can be paid over time in the Chapter 13 plan as well. Normally the homeowner makes one payment to a court appointed trustee, who pays debts included in the plan from the payment. After filing Chapter 13, the homeowner then resumes making the regular monthly payment on the home, while the arrears are paid to the mortgage company by the trustee.

Chapter 13 can make it easier for the homeowner to resume making their house payments by restructuring their other debt as well. Credit cards, medical debt, personal loans, and other unsecured debts are paid through the plan, but may not have to be paid in full, depending on the homeowner’s income and family size. Many chapter 13 filers pay only a small percentage on these debts with the balances being “discharged” or forgiven by the court when the plan is successfully completed. Some car loans can be restructured to reduce the balance of the loan to the value of the vehicle, and to reduce the interest rate.

A homeowner who is facing foreclosure may be able to use the protections of bankruptcy to allow them to catch up missed payments over a reasonable period of time, and protect the equity they have in their home.

Call our nearest Texas office for prompt HELP:

Bedford Ph 817.868.5500 | Dallas Ph 214.252.9099 : 866.378.4705 | Ft. Worth : Ph 817.263.3000 | Houston : Ph 281-335-7744 : 866-715-1529 | Arlington : Ph 817.276.6000 : 817.276.6020 | Grand Prairie : Ph 972.642.7900 : 866.380.3369 | Irving Ph 972.256.6300 | Weatherford: Ph 817.594.5428 | Harlingen: Ph 956.440.0534 Brownsville 866-678-1900 | Mesquite: Ph 972.682.7868 | McAllen: 956.686.8500

Texas Bankruptcy Attorneys : J. C. Bailey III : Fred Jones : Albert Rodriguez : James Ince