Are You Too Far Behind on Your Mortgage for Chapter 13? Chapter 11 M...

Mortgage lenders have been delaying foreclosures for people all over the country. Ask any bankruptcy attorney–they’ve seen cases where people haven’t made a mortgage payment for two, three, or even four years, and the mortgage company hasn’t even started the foreclosure process. Loan modifications can stretch on, court proceedings are scheduled and canceled, an unsuccessful Chapter 13, can all delay things. As a result, the mortgage arrearages–the amount you’re behind on your mortgage–can add up to a lot of money.

When you go to most consumer bankruptcy attorneys to file for a Chapter 13 repayment plan, you’re told that the plan payments will be too high for you to afford, since the full amount of the arrearage must be paid over a maximum of five years. If the arrears are $60,000, for example, this would require at least a $1,000 per month payment on top of resuming the regular monthly payment. Most people just can’t afford it.

This may result in many people thinking that they have no alternative other than losing their home. But there may be another alternative: an individual Chapter 11.

Most people don’t even know that individuals can file for Chapter 11; they think that it’s just for businesses. This is not true. In fact, my law partner, Dan Press, and I have written a book for LexisNexis about individual Chapter 11′s, Chapter 11 for Individual Debtors, and we teach other attorneys how to handle individual Chapter 11 cases. In a Chapter 11 case, there is no five-year limit on the repayment term for mortgage arrearages. In many of my Chapter 11 cases, I have obtained repayment terms of up to 30 years, without interest. In the example above, instead of a $1,000 per month payment, my client is looking at a monthly payment of $166.67. This is a lot more doable.

Chapter 11 isn’t for everyone. It is much more complex and expensive than a Chapter 13, and there aren’t a lot of consumer bankruptcy attorneys who know how to steer you through an individual Chapter 11. Make sure you find someone experienced in this aspect of bankruptcy law. The rewards can be significant.