3 Quick and Easy Ways to Pay Less for Your Bills
Think you can only clear out unsecured debt with bankruptcy? Think again. Bankruptcy is a tool for the honest consumer who is in over their head in debt. Therefore, naturally, there are few routes that can be taken within your own bankruptcy. This article discusses three (3) of them.
Strip your second or third mortgage on underwater real property. If you have a home that you bought at the height of the market and now find that you owe way more than what is valued, you are in luck. If you file a chapter 13 bankruptcy, you can have your attorney file a Motion stripping the second lien (subject to your court’s local rules). This is applicable if the house is underwater and the second mortgage. Essentially, this “strip” turns your second mortgage, which is a secured debt, into an unsecured debt. Practically speaking, what this means for you, if you successfully complete your chapter 13 plan payments, upon discharge and plan completion, the second lien is wiped out and no longer owed. If your attorney is successful in obtaining an Order Granting the Motion to Strip the Second Mortgage Lien, then your payments for the second lien will no longer be the mortgage payment itself, rather, the payments you are already making to your unsecured creditors, will then be pro rata distributed to the second mortgage lien holder.
Lower your interest rate on a vehicle you have owned for at least 910 days. Similarly, if you have a vehicle that you purchased over 910 days before filing for bankruptcy, and the car is underwater, you can try to legally owe the value of the vehicle at a lower interest rate, in a chapter 13. Most Trustees will accept a NADA or Bluebook valuation of the make and model of your car. If the creditor objects, your attorney will need to negotiate with the creditor to agree to the newly owed amount. Once the Creditor and you agree to the principal balance and interest rate, you can begin making those payments in your chapter 13 payments. Caveat, although a creditor and yourself agree to the new principal and interest rate, it does not become finalized until you complete your chapter 13 plan payments. That means, if you stop making your chapter 13 plan payments, and the bankruptcy case ultimately gets dismissed, that lower agreed amount is now no longer honored and the owed amount will revert back to the original amount and interest rate owed.
Reaffirmation Agreement - Negotiate a New Balance: Only in a chapter 7 can you reaffirm a secured loan (ie. a loan on a car or mortgage). Although, it is generally not recommended to proceed with reaffirming a debt for a mortgage, if you decide to reaffirm your debt for a car, you can usually negotiate with the car lender for a lower principal balance or interest rate.
If you are successful in receiving a discharge in a bankruptcy case, not only can you be eligible to discharge all of your unsecured debt, catch up on payments for a secured arrearage and lower the amounts owed on your underwater car (& eligible mortgage), but also just simply not owe money on your second or third mortgages.