The answer is maybe? But, the solution could be a Chapter 11. Why? Mortgage lenders have been delaying foreclosures for many months and even years for many people. As a result, the arrearages (the amount you’re behind on your mortgage) can be 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 minimum of three years and a maximum of five years. If the arrears are $60,000, for example, this would require at least a $1,000 per month fixed payment to be paid through the Chapter 13 case. You will further be responsible for your regular monthly payment going forward from the Chapter 13 Bankruptcy filing date. So for instance, if your mortgage’s regular monthly payment is $800.00 per month coupled with the $1,000.00 Chapter 13 payment to cure your arrearage amount of $60,000.00, then your total monthly outlay would be at a minimum $1,800.00 if you were to file for Chapter 13 Bankruptcy. Thus, most people just can’t afford it.
Chapter 11 Bankruptcy – Not Just for Businesses
This may result in many people thinking that they have no alternative other than losing their home. However, an individual Chapter 11 may be an alternative.
Most people don’t even realize that an individual can file for Chapter 11. They think that it is just for businesses. This is not the case. For instance, a famous recent individual Chapter 11 was NFL quarterback, Michael Vick.
In a Chapter 11 case, there is no five-year limit on the repayment term for mortgage arrearages. A repayment term of up to 30 years would be possible. Sometimes with no interest on the arrears. So in the example above, instead of a $1,000 per month payment, you would be looking at a monthly payment of $166.67 on top of your regular monthly mortgage payment of $800.00. So $966.67 would be a lot more feasible.
Chapter 11 isn’t for everyone. It is much more complex 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.
If you are considering a Chapter 11, you should definitely consult with an experienced bankruptcy attorney to help you with the case as it is extremely complicated.
At Bond & Botes, our affiliated offices offer free initial consultations. Please feel free to call one of our conveniently located offices to set up a private consultation with one of our experienced attorneys. We will analyze your situation and help you to make the best decision possible.
Grant McNutt is a Managing Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Science from the University of Alabama, and a Juris Doctorate from the Birmingham School of Law. He has been practicing Consumer Bankruptcy Law since 1999. Read his full bio here.