Bankruptcy and Mortgages

Numerous people across the country are facing escalating mortgage payments on a home where a large portion of the home’s value might have vanished. In this economy, the majority of banks are not keen on renegotiating rates or extending loans, opting instead to foreclose on the property. In addition, the bankruptcy laws, written for the most part a generation ago, are not helpful.

When the bankruptcy laws were initially written, there was really only one type of home loan: the standard, 30-year, fixed rate version. Now, however, is the era of exotic home loans and steep, sudden drops in property values.

One of the biggest problems is that a bankruptcy judge cannot modify the loan on a home, even though he or she can change provisions on other debts. For example, a judge can adjust the loan terms of cars, sailboats, power boats, vacation homes, and investment homes but that same judge can’t adjust the loan terms of a family’s primary residence.

This creates unfairness for an individual with five investment properties. He or she can have a judge modify the mortgage payments on any of the investment properties but not his or her primary residence. At the same time, a family whose main debt is their home is faced with inflexible laws that do not help them.

Advocates for legislative reform feel that allowing a judge to establish a home’s fair value or to reduce the interest rate of a mortgage could help reset property values for millions of troubled homeowners. Banks would lose some income as a result but they would lose less income than in a foreclosure proceeding.

Contact a Boston Bankruptcy Lawyer

If you are facing a dire financial situation and ballooning mortgage payments and so are considering filing for bankruptcy, contact the Boston bankruptcy lawyers of Joshua Spirn & Associates at 1-800-975-5346 to determine which form of bankruptcy is best for you.