Legally Speaking
Using a Chapter 13 Bankruptcy Plan to Keep Your Home and Investment Properties for Much Less Than You Owe By Omar J. Arcia, Esq. Foreclosure Defense and Consumer Bankruptcy Protection Attorney
M
ost consumers are familiar with a simple Chapter 7 bank-
ruptcy in which all of the debtor’s assets are liquidated and all unsecured debt (credit cards, medical debt, etc.) is wiped out. However, within a Chapter 7 bankruptcy you will not be able to modify your home loan or any other amounts owed on any investment properties. In fact, your lender has the right to continue a foreclosure process on your home during a Chapter 7 bankruptcy with permission from the court, which is always granted when the homeowner owes more than the market value of the home. Yet many consumers are unaware of the far reaching benefits of a Chapter 13 bankruptcy. Unlike a Chapter 7 bankruptcy, under a Chapter 13 a debtor restructures instead of liquidating debts. Over a period of 3-5 years, a Chapter 13 debtor has the ability to repay all mortgage arrearages, late fees, escrow shortages, credit card and other unsecured debt negotiated down to about one percent (1%) of the amount owed, reduced student loan payments, IRS liens, reduced car payments. Even attorneys’ fees are paid over time as part of the Chapter 13 plan. Perhaps the most beneficial part of a Chapter 13 plan is the ability to remove all second mortgages, lines of credit and other liens (including homeowners’ association liens) from your principal residence, and to significantly reduce principal balances on investment properties. In order to qualify, the debtor must be employed, or have a regular source of income, and the amount owed for the first mortgage on your principal residence must exceed the market value of that home. As it relates to the debtor’s investment properties, under a Chapter 13 plan you are able to wipe out any second mortgages or credit lines, and reduce the principal balance of the first mortgage on each property to the current fair market value, payable at a low fixed interest rate, amortized over 15 years, through an affordable monthly payment. Once a debtor submits a Chapter 13 plan and begins to make payments, the lender cannot proceed with a foreclosure. If you owe more on your first mortgage than the fair market value of your home, have one or more additional mortgages, lines of credit or other liens on that property, and are currently employed, you may be a perfect candidate to file a Chapter 13 bankruptcy. If you also have investment properties which are upside down in value, and would like to keep them because they are generating rental income, a Chapter 13 bankruptcy is the ideal solution to resolve your mortgage crisis, instead of wasting countless hours attempting to modify your loans directly with lenders. More detailed explanations of different options available to homeowners in foreclosure, at risk of foreclosure, or considering bankruptcy are discussed in a new instructional DVD developed by the Arcia Law Firm entitled “Fight for Your Home.” If you mention that you heard about the DVD through this magazine, you will receive a FREE copy when you make an appointment to discuss your case in detail with a member of our legal team. Contact the Arcia Law Firm at 954-437-9066 to schedule your free consultation. You may also visit www. arcialawfirm.com for more information about the Firm, our staff and credentials, detailed articles, informative videos, and to make your appointment online.
davie town times | January 2014
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