Even in bankruptcy, you gotta watch ’em!

One of the best ways to prevent foreclosure on your house is to file bankruptcy. This stops everything while you and the court try to figure out a payment plan that might let you keep your house. Your laywer, working with the court’s trustee, gathers complete information about your income, assets and debts and then decides what debts (like credit card debt) to eliminate or reduce. Then they work out a payment plan for the “secured debt,” like your mortgage.

Typically, unpaid back payments on your mortgage are packaged up and paid off over time, with no interest or penalties, while you resume current payments. The lender is not obligated to adjust the interest rate on payments going forward, but these days they are more likely to do that.

However, all this depends on getting correct information and active cooperation from your mortgage holder. The Wall Street Journal reports that one of the nation’s largest lenders, Countrywide, has been faling to do those things in some cases.

The US Trustee program claims that there have been “widespread mistakes” by Countrywide “…about how much borrowers owed the company at the start of the bankruptcy and about improperly crediting borrower payments during bankruptcy, among other issues.”

For more information on bankruptcy, click here.

Comments are closed.