Kentucky Bankruptcy Law

Counsel with Care

Balloon or Bust!

A number of people took out balloon payment loans (interest only loans) prior to the whole mortgage mess and economic downturn. They seemed like a great idea at the time because it allowed folks to buy more of a house than they could actually afford at the time with the notion that they would either have turned around and sold the home for a profit in a few years or they anticipated greater incomes. Of course, the economic crevasse we fell into precluded sales for profit and kept salaries from rising.

So now, many people are either facing that final payment in a few months or that balloon has already popped leaving them with massive arrears. There is a remedy IF your income can sustain it: Chapter 13. Let’s say you have $50,000.00 in arrears on one of these loans and your income would support a plan payment of $900 or $1,000 per month (about what you would pay in rent anyway), then you could save your home.

In the Eastern District of Kentucky, the entire arrears can be paid through the plan at 0% interest. Obviously there are other factors that can be considered, but if you have a balloon house payment that has already come due or about to come due, then it would be worth consulting with a bankruptcy attorney to see if saving the house can work.

As a side note, even if a judgment has been issued in a foreclosure action, you can still filed a Chapter 13 and turn things around. So long as the house has not sold at auction, then a Chapter 13 can stop the litigation and give you a chance to work out a plan to save your home. Frankly, this works best for lenders as well, because they will get 100% principal rather than the 2/3 that would come through a Master Commissioner sale.

May 17, 2013 Posted by | Bankruptcy, Chapter 13, Discharge, Foreclosure, Plan, Plan payments, Planning, Pre-filing planning | , , , , , , , | Leave a comment