How to Cure a Delinquent Mortgage by Filing Bankruptcy
Consumers from all walks of life face delinquent mortgages and wonder what course of action to take in this situation. One viable option that can be pursued to cure a delinquent mortgage is filing for bankruptcy protection. Either Chapter 7 or Chapter 13 bankruptcy permits you to resolve the matter of a delinquent mortgage. You have the ability to keep your residence and continue to pay your home mortgage loan under either of these bankruptcies.
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Things You'll Need
- Petition for bankruptcy
- Reaffirmation agreement
- Index (matrix) of creditors
Instructions
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Obtain the necessary forms to start a bankruptcy from the clerk of the bankruptcy court. The primary forms needed to get a bankruptcy underway are the petition and matrix of creditors (sometimes referred to as the index of creditors). Request these forms either at the clerk's office or by downloading them from the bankruptcy court's website.
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Complete the petition for bankruptcy and matrix of creditors. The matrix is a master list of all of the businesses and individuals to whom you owe money. Include your mortgage lender on the matrix.
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Claim your residence as "homestead" property. Your homestead is protected from creditors in your bankruptcy case.
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File the petition for bankruptcy and matrix of creditors with the clerk of the bankruptcy court. Because your mortgage lender is listed on the matrix, the clerk of the bankruptcy court will send what is known as a proof-of-claim form to that creditor (and to your other creditors as well). The proof-of-claim form notifies your creditors of your pending bankruptcy case and permits them to make a claim in the proceedings.
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Write a letter to your mortgage lender. Advise the lender that you want to enter into a "reaffirmation agreement" regarding your mortgage loan. A reaffirmation agreement is akin to a renegotiated mortgage loan. The delinquency on your mortgage is cured, and a new payment plan is created. The reaffirmation agreement makes your loan current. If you then make payments in a timely manner, you retain ownership of your residence.
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Obtain a reaffirmation agreement from the bankruptcy trustee or from your mortgage lender.
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Complete and sign the reaffirmation agreement. The execution of the reaffirmation agreement normally takes place at the regularly scheduled meeting of creditors in your bankruptcy case. The reaffirmation agreement is included in a Chapter 13 bankruptcy payment plan or excluded from the discharge of debts in a Chapter 7 bankruptcy.
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