Forbearance and the CARES Act

What Is Mortgage Forbearance?

A forbearance is a workout option available to homeowners having a financial hardship. As the coronavirus pandemic drags on and strains Americans’ finances, 3.4 million homeowners were in forbearance in September of 2020. The typical terms of a mortgage forbearance are payments can be “skipped” for 90, 180, up to 360 days for those that are affected by COVID-19.

Normally, forbearance can drag down a homeowner’s credit score, though less so than missed payments. But the CARES Act directs mortgage lenders to report your account as current to the credit bureaus, as long as you were not behind on payments when you requested the forbearance. However, eventually, forbearance agreements end, and homeowners might be stuck with expensive mortgage payments just as they’re getting back on their feet.

What you need to Know

• The homeowner will need to make up the missed payments.
• Missed payments may be deferred to the end of their mortgage term, or
• Rolled into the mortgage balance, or
• Be called due all at once.

This is what can go wrong

At the end of your forbearance term, all skipped payments are due at once. Now, this isn’t realistic for most families, especially if you haven’t made a payment in 6,9, or 12 months! Most mortgage servicers will have other options for reinstating your loan. But what if you are unable to meet your mortgage servicer’s conditions for reinstating, modifying, or refinancing your loan and losing your home to a foreclosure is out of the question?

How Can Bankruptcy Help?

One of the most powerful tools that we have in bankruptcy is that we can stop foreclosure. We can stop the eviction process, we stop lawsuits, we can stop wage garnishments, and essentially what that amounts to is that we stop all legal proceedings against the debtor, as to the collection of debt, the moment we file your bankruptcy case. Under Chapter 13, the moment we file the bankruptcy, that mortgage is essentially deemed current. The unpaid balance of the forbearance is then made a part of your repayment plan.

We are Here to help

If you are struggling financially and haven’t arrived at a solution, a consultation with an experienced bankruptcy lawyer is your best next step. At Bond & Botes Law Offices, we help people resolve debt in Alabama, Tennessee, and Mississippi. You can schedule your free consultation right now by calling 1-877-581-3396 or filling out the contact form on this page.