Tag Archives: mortgage modification

What kinds of debt can bankruptcy eliminate?

A Rhode Island bankruptcy filing can be used to get rid of many types of debt. Filing under Chapter 7  may allow many types of debts to be wiped out completely:

  • credit card debt
  • electric, gas, water, and other utility bills
  • medical, dental, and vision bills
  • personal and unsecured bank loans
  • automobile loan obligations remaining on a repossessed vehicle
  • mortgage loan obligations remaining on a foreclosed home

Any child support obligations, recent taxes, and student loans are generally not eligible for discharge. But in some cases, even student loans can be eliminated in a bankruptcy if it can be shown that these debts create an unreasonable hardship for you.

Can I modify my mortgage with a bankruptcy in Rhode Island?

According to a recent study, the typical Rhode Island house lost 25% of its value last year.  For many homeowners, the only alternative to losing a home to foreclosure may be to modify their mortgage.  Fortunately, current bankruptcy laws allow for many Rhode Island homeowners to dramatically reduce their monthly mortgage payments.

If your house is valued at less than you own on your first mortgage, you may be able to eliminate most of yoursecond mortgage with a bankruptcy (for owners of rental properties or investment real estate, it’s even better: you can often use a RI bankruptcy filing to modify both the first and second mortgage).  This can be done by filing for a Chapter 13 bankruptcy: you eliminate your second mortgage obligation and instead make a series of monthly payments for a limited period of time (between 36 and 60 months, depending on your income).

Given the magnitude of most second mortgages, this approach can result in significant savings. For example, if you have a $40,000 second mortgage, you could potentially eliminate all but $7,200 of your debt in a Chapter 13 bankruptcy.