I am behind on my mortgage but have no other debts. Should I file for Chapter 13 bankruptcy?

Learn about options if you are struggling to pay your mortgage, including bankruptcy and nonbankruptcy alternatives.

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Question

I am behind on my mortgage payments. I am not behind on any of my other loan or credit obligations. Can Chapter 13 bankruptcy help?

Answer

If you are behind on your mortgage but don't owe a lot of other debt, a Chapter 13 bankruptcy can help you keep your home. However, there are other ways that you might be able to reduce your mortgage payments or deal with missed payments without resorting to bankruptcy. It's often better to try those options first.

Making Home Affordable Program (MHA)

If you have a qualifying mortgage, you may be able to participate in MHA. MHA offers a variety of programs that may provide you with relief while still enabling to keep your home. Some options that may be available to you through MHA include:

  • loan modifications, which could reduce your interest rate and/or payments (Home Affordable Modification Program, or HAMP)

  • reduction of the principal balance owed if your house is under water (Principal Reduction Alternative or PRA)

  • unemployment forbearance (Home Affordable Unemployment Program or UP), which temporarily reduces or suspends your mortgage payments, and

  • mortgage payment assistance, payment and principal reductions, and more under the Hardest Hit Fund (Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets, or HHF), and/or

  • if you are ready to walk away, assistance in moving away, including up to $3,000 relocation assistance (Home Affordable Foreclosure Alternatives, or HAFA).

If your loan is guaranteed by Freddie Mac or Fannie Mae, your lender must consider you for these programs. If you do not have a Freddie Mac or Fannie Mae mortgage, you lender may have agreed to participate in MHA. To learn more about these programs, visit our Government Foreclosure Prevention Programs topic area.

Deal Directly With Your Bank

Even if your bank does not participate in MHA, it may still offer some sort of relief. Many mortgage companies routinely provide assistance such as:

  • forbearance (temporary reduction or suspension of payments)

  • loan modification, including reduction of the interest, payments and/or principal balance, or 

  • refinance options.

To learn more, see Alternatives to Foreclosure.

Reinstatement

If the bank is not willing to work with you, at a minimum, you should be legally entitled to reinstate your mortgage. To reinstate your mortgage, you must bring current all of the past due payments, along with paying other costs and late fees.

For more on reinstatement, see Your Options to Avoid Foreclosure.

Chapter 13 Bankruptcy

If these options won't work for you, then it may be a good idea to file Chapter 13 bankruptcy. A Chapter 13 can help save your home by allowing you to get caught up on the past due payments over time. It may also allow you to reduce or eliminate second or third mortgages and other liens, depending on your circumstances. To qualify, you will need to make sufficient income to support your Chapter 13 plan.

For more information, read Your Home in Chapter 13 Bankruptcy.

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