Filing Bankruptcy With an Option Arm Mortgage

After the 2007 release date meltdown, I don't think there is an individual that lives in America that has heard of an option arm mortgage. In case you forgot, an option arm mortgage was created to allow an individual to have an adjustable payment plan. Debtors that add or have these loans had a choice of paying principal and interest, interest only, and the crazy one which was making a minimum payment that would make the principal continue to rise. The loan reset when the principal rose to a certain amount or usually in a five year period, whichever came first. There are still a lot of these loans out there and they're set to come due in 2011 in 2012. Most of these loans were jumbo mortgages for the larger more expensive homes. If you are in this situation and haven't refinanced because the value of your property has dropped so much, you should consider consulting a bankruptcy attorney to see if Chapter 7 or Chapter 13 bankruptcy might help your current situation. Back in the day, many people with these loans also took out lines of credit and second and third mortgages. If this is the case, and the value of the property has dropped substantially, a Chapter 13 bankruptcy might help because it might allow the debtor to modify the loan and strip off the second and third mortgages.

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Sometimes using a bankruptcy filing along with other options can be very helpful. If you choose the path of bankruptcy, ask your bankruptcy attorney to try and negotiate a loan modification with the lender. The earlier you evaluate your current situation and decide on a path will relieve a lot of stress. The worst thing to do is to bury your head in the sand and wait until your loan comes due.

When a person is not behind on their mortgage and it's the credit cards that are making it impossible to pay your bills, a Chapter 7 bankruptcy might help. If the debtor is proactive enough to refinance their home, prior to filing bankruptcy, they can benefit from getting the lowest interest rate possible and wipe out all of the unsecured debts from the credit cards after. Waiting to refinance after the bankruptcy is filed may not be possible because of the damage to your credit. This is one reason why it's good to be proactive when financial difficulties come your way. Planning before filing bankruptcy can be beneficial to your future. Even though a debtor will get relief from their creditors, there will be financial consequences that will follow them for a few years down the road. A Chapter 7 bankruptcy will stay on an individual's credit report for up to 10 years. This means the debtor will pay higher interest rates and have a tough time getting loans. If a person files a Chapter 13 bankruptcy, even though it stays on their credit report for seven years, potential lenders look more favorably on a Chapter 13 plan than on a Chapter 7 bankruptcy because they recognize the efforts that the debtor made to repay their debts. Whatever direction you choose, it's always best to consult with a local bankruptcy attorney to go over all of your options and see if there's any way to protect your property while allowing you to get your finances back on track.

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