A report from the credit bureau TransUnion says that the number of homeowners who have fallen behind by at least 60 days increased for the 12th straight quarter in the 4th quarter of 2009. The percentage of homeowners who were 60 or more days behind on mortgage payments was 6.89%, up from 4.58% for the 4th quarter of 2008. That is a 50% increase from 2008 to 2009. So, the question is, what are these people going to do?
Obviously, if the late mortgage payments were caused by some short-term bump in the road and they have the ability to catch up the payments, that is the best alternative. But most people do not get 60 days behind on the mortgage unless there is a major problem. If that major problem has resulted in becoming 60 or more days late, they need to be looking into bankruptcy quickly. If they want to save the home, their options have become limited by waiting so long. To catch up the past due amount and still keep the home, they will likely need to file a Chapter 13 and include the past due amounts in their Chapter 13 payment plans. But this also assumes that they can still afford the home.
If they cannot afford the home or are already looking to move, Chapter 7 may still be the best option. To keep the home under a Chapter 7, they must be current on the mortgage. So, waiting until they are 60 or more days late probably prevents them from saving the house through Chapter 7. However, the Chapter 7 can eliminate any deficiency judgment if the home is foreclosed (and it will be foreclosed if the mortgage isn't caught up soon). That would allow these homeowners to walk away from the home without having to pay the mortgage payments or any deficiency judgment. The biggest issue, though, is making sure the bankruptcy is filed before the foreclosure happens.
I have written before on not waiting too long to start the process. Being a bankruptcy attorney in Tennessee, I continue to see clients who have simply waited too long and this new report just confirms that. If you are falling behind on your mortgage, you need to start making decisions on what to do about it. Just hoping that things will get better may eliminate your options, particularly if you are trying to keep the house.
