Financial Distress

Mortgage Foreclosure

Ways to Stop Mortgage Foreclosure in Pennsylvania

People fall behind on their mortgages for multiple reasons such as job loss, illness, divorce and unexpected expenses. Any of these can cause you to have financial difficulty. You do not have to sit back and do nothing. You should realize that you can avoid mortgage foreclosure.

As a general rule, the earlier you act on your situation, the better the chance you have of working things out and putting a stop to the mortgage foreclosure process. In fact, you can take action even before you receive a notice of default. Hutzelman & Harmon can help you avoid mortgage foreclosure. Here are some of the ways to get help with stopping foreclosure in Pennsylvania:

• Repayment Plan – This is an option to make arrangements to catch up on your missed payment over a short time.
• Forbearance Plan – This is an option in which the mortgage company or loan servicer allows a temporary reduction or a suspension of your monthly payment. These missed payments will have to be made up through an increase in your future payment amount.
• Loan Modification – If you have fallen behind a fair amount, or you realize you are no longer able to make regular monthly mortgage payments due to an unforeseen circumstance such as job loss, or substantial change in expenses or circumstances, you can ask the lender to modify the existing terms of your mortgage by changing the amount of your payment, interest rate, and/or term of your loan. This procedure can be quite complex and it may be difficult to provide all the documents that lenders require.
• Pennsylvania Housing Finance Agency – For Pennsylvania residents who face losing their primary residence through foreclosure, you may be eligible to receive this type of loan to bring your mortgage up to date. (Note that FHA insured loans do not qualify for this option.) Depending on your individual circumstances, you may also be eligible to receive financial assistance with your monthly mortgage payment for up to 24 months from the date of your default.
• Refinancing – This is an option to take out a new loan to pay off your outstanding mortgage loan. Getting mortgages for people with foreclosures is not simple. It is not always east to refinance if you are behind on the mortgage or if your credit is not perfect.
• Chapter 7 Bankruptcy – If you are interest in staying in the property, while clearing yourself of any debts owed on the property this is an option. Chapter 7 would help you if discharge of your bills would enable you to make the mortgage payment.
• Chapter 13 Bankruptcy – By filing a Chapter 13 Bankruptcy Petition, you immediately stop mortgage foreclosure proceedings. You are able to file a Plan that gives you up to five years to get caught up on your mortgage delinquency. Other bills such as credit cards, loans, medical bills, utility bills and other debts on your credit report can be reduced or completely wiped out. Income taxes can be also included and in many cases reduced, and real estate tax arrears can also be included in the Chapter 13 bankruptcy. You are able to file a Chapter 13 bankruptcy to stop a Sheriff Sale – even if the Sheriff Sale is scheduled for the next morning. In addition, Chapter 13 bankruptcy has the great feature of allowing a second mortgage to be wiped out and treated as an unsecured debt (like a credit card or personal loan) if there is no equity in the property for the second mortgage. Furthermore, you can reduce the interest rate on a car being paid off inside the bankruptcy and can also reduce the debt owed on the automobile in some cases if the auto loan is at least 30 months old.Finally, Chapter 13 in some circumstances allows for the ability to pay off the total mortgage debt in its entirety inside the Chapter 13 plan with the result that once the plan is paid off, you own your home free and clear of any mortgage. If you file Chapter 13 bankruptcy, and comply with the requirements, you can achieve your goal of completely stopping mortgage foreclosure.

Bankruptcy

Should you file for bankruptcy?

What do Henry Ford, Walt Disney, Milton Hershey and H. J. Heinz all have in common? Each of them filed bankruptcy and went on to greater success, at least in part thanks to the fresh start provided by bankruptcy. A person should seriously consider filing bankruptcy when they find themselves in the risk of losing property that is important to them, or find themselves unable to keep up with their debt payments. Their problems may have arisen due to illness, unemployment, divorce, overspending or other assumptions which did not come true.

Types of Bankruptcy

There are several types of bankruptcy, including:

Chapter 7
A Chapter 7 bankruptcy is a liquidation in the sense that a Court Trustee examines the Debtor’s property and determines if there are any assets to administer for the benefit of creditors. Very few people end up with this happening because of proper planning in the filing of cases.

A Chapter 7 bankruptcy would discharge all debt except for the following:

• Most income tax.
• Child support, alimony and property settlement payments.
• Most student loans.
• Debts which arise from fraud, drunk driving and similar activities.
• Secured debt may not be cancelled unless the collateral is returned to the creditor.

Chapter 13
A Chapter 13 case is a payment plan case where one must make payments to a Court Trustee to be distributed under a plan developed by the Debtor and approved by the Court. People wonder how much they must pay for how long. A plan must consist of a minimum of three years, but may go to five years. Some higher income parties are required to go for five years, but anyone can go for up to five years. One may ask why they should pay for five years if they can get by with three years. The answer is, the payment could be lower. The amount of the plan payment must meet five different tests:

1. The plan must be filed in good faith.
2. The Debtor must be making his or her best effort.
3. The plan must pay the creditors at least as much as they would receive in a Chapter 7. Generally that would be nothing for unsecured creditors.
4. The required expenses and most income taxes would have to be paid.
5. Secured debt would have to be paid in the proper amount in order to keep the collateral.

The persons who should file a Chapter 13 would be:

• A party who is facing the loss of property by being behind on the loan.
• A person with an older vehicle loan where the car is valued at less than the amount of the loan.
• A person with substantial tax debt.
• A person whose income exceeds statewide median income.

Chapter 12
Chapter 12 is a provision limited to family farmers. It is generally similar to Chapter 13 except that the rules involving modification of secured debts are more favorable for the farmer than in an ordinary Chapter 13 case.

Chapter 11
Corporations are required to file Chapter 11 cases. This is a complex set of procedures that require detailed preparations and complete reporting requirements. A Disclosure Statement must be approved by the Court before a plan may be sent to the creditors for a vote for approval and a final Court confirmation order. There are simplified procedures for small businesses that eliminate some of these requirements.