Chapter 13 Is Helping More Homeowners As New Loans Become Harder To Find

With the housing market slowing down, most appraisals are coming in at least $50,000 lower than what they might have been a year ago. At the same time, some subprime lenders have closed shop and mostly all it seems have restricted their lending guidelines. With loans harder to find and less equity available, many homeowners cannot refinance like they had planned. Many are stuck with adjustable rate loans that had attractive teaser terms – low early monthly payments – but which will reset to much higher payments soon. All this is creating a situation where the only remaining alternatives to get out of foreclosure are to try to settle, sell, or file Chapter 13. For those who do not have some savings on hand to pay the lender in a forebearance agreement, they may find that their lender will not work with them at all.

However, if they have income, Chapter 13 is still a very good solution. It can give them a chance to catch up on the mortgage arrears and other debts and save their property. Lately, more and more people are calling me to discuss this alternative. I can usually quickly determine in a phone consult (which I have been offering for free) whether Chapter 13 makes sense or not. Most people do not really understand how it works or how it might help them. But with the other options becoming more restricted lately, I think Chapter 13 filings are about to increase. For many people, Chapter 13 can be an excellent alternative – it gives them 3 to 5 years to catch up on debt while they are protected from foreclosure, lawsuits and creditor harassment. To make my clients more comfortable with their decision to file Chapter 13, I also offer them the alternative to try to help them obtain a forbearance agreement first, something I can handle for a fraction of the cost of a Chapter 13. If I can keep someone out of bankruptcy, I will. But it is always reassuring to know that even if the lender won’t settle, the client has the fall-back option of Chapter 13.