Mortgage Problems in Pensacola

On June 13th, 2015, the Pensacola News Journal ran a front page article “Mortgage Holders In Deep”. The article stated, “…more than 45% of Pensacola metro area homeowners with a mortgage owe at least 20% more than their home is currently worth …A total of 16,343 local homeowners are underwater, which accounts for more than 20% of mortgage holders in the area…”

Unbelievable? To many of you it is. However, in my bankruptcy law practice, I see it every day throughout the Gulf Coast region. Over the last several years, the housing crisis has been by far the number one financial problem facing Gulf Coast residents. It’s frustrating and stressful.

If your house is underwater, it will be difficult to sell, and you will need your mortgage company’s approval to enter into a “short sale’. Even with the mortgage company’s approval, in most cases, you still owe the mortgage company the difference between what you owe and the sale price. Likewise, if you are behind on your mortgage payments, you are in jeopardy of losing your house as the mortgage company may file a foreclosure lawsuit. If your house gets sold at a foreclosure sale, you are still responsible for the “deficiency”.

The picture painted in the News Journal article and in reality is bleak, but there is hope and help. In one of our previous blogs, “Using Bankruptcy To Keep Your Home”, we explained how we can use Chapter 13 bankruptcy to help Gulf Coast residents save their house and make it more affordable. In addition, Chapter 7 bankruptcy can also be used to help save your house or in cases where you can not afford the house or it is underwater, you can use it to give your house back and wipe out the entire mortgage.

Chapter 13 Bankruptcy Can Help You Keep Your House

Chapter 13 bankruptcy can help residents along Florida’s Gulf Coast that have missed mortgage payments catch up on the missed payments and stop or prevent a foreclosure. As long as the bankruptcy case is filed prior to the actual foreclosure sale date, it allows you to stay in your home and it stops the foreclosure. There are two options we can use in Chapter 13 to help you stay in your house:

  • Option 1: Catch Up Method — The catch up method allows you to propose a repayment plan to pay back the past due mortgage payments over a 3 to 5 year period. At the same time, you must begin making your regular mortgage payments again. You may be thinking, “how in the world can I do this and still pay my other debts?” Good question! Chapter 13 allows us to include or consolidate your other debts (i.e.: credit card bills, medical bills, payday loans) in the plan, but only pay those at a discount. This plan allows you to use your money that was paying your credit cards to help fund the house payment.
  • Option 2: Mortgage Modification — Mortgage modification is available in Chapter 13. This method allows you to propose a repayment plan which modifies your mortgage. Instead of catching up the past due payments and making your regular mortgage payment, this alternative may allow you to change the payment terms, interest rate, principal balance, and place past due payments at the end of the loan. If a modification is accepted, the new mortgage payment would be paid into the bankruptcy court for a 3 to 5 year period and forwarded to the mortgage company. This plan would also include your other debts, as described in option 1 above. We can use this method even if you have already done a modification or have been denied a modification.

Chapter 7 Bankruptcy Can Help You Keep Your House

Under this alternative, you must be current on your mortgage payment. Chapter 7 wipes out your other debts (i.e.: credit card bills, medical bills, payday loans). This allows you to use the money that was going to pay your credit cards to help fund house payments and makes keeping your house more affordable.

If you are experiencing financial difficulty, please call us to set up a free consultation appointment so we may help you find a solution to your debt problems.