| Many professional mortgage services organizations | | | | Chapter 13 Bankruptcy is referred to as debt |
| help process mortgages and loans for fixed rates, | | | | reorganization or debt consolidation. It is designed |
| process first time home loans, variable rate | | | | to stop a foreclosure on a home allowing for a |
| mortgages, and land loans as well as assist in debt | | | | homeowner to catch up on back payments |
| reorganization. Debt reorganization, or debt | | | | usually over the course of sixty months. Chapter |
| restructuring, is an arrangement involving both the | | | | 13 can also be used to pay off an automobile, |
| creditor and the debtor that change the original | | | | lower credit card payments, and pay back debt |
| terms for servicing an existing debt. Debt | | | | with no interest or penalties. Homeowners who |
| reorganization usually involves relief for the debtor | | | | have filed Chapter 13 in order to stop a |
| from the existing terms and conditions of a debt | | | | foreclosure are still eligible to refinance their home. |
| obligation. This may be in response to liquidity | | | | After filing for Chapter 13 and stopping |
| issues, such as when the debtor does not have | | | | foreclosure, the homeowner will often enter a |
| the cash needed to meet upcoming payments. | | | | credit repair program and refinance their home |
| There are four main types of debt reorganization: | | | | after the having made 12 consecutive, on-time |
| 1. Debt forgiveness: a reduction or complete | | | | payments in the Chapter 13 Bankruptcy. A |
| suspension of a debt obligation by the creditor via | | | | Chapter 13 Bankruptcy stays on a credit report |
| a contractual arrangement with the debtor. | | | | for seven years. |
| 2. Debt rescheduling or refinancing: a change in the | | | | Debt reorganization is usually accompanies a |
| terms and conditions of the amount owed. The | | | | bankruptcy filing, but not always. A reorganization |
| change may result in a reduction in present value | | | | proposal can be agreed upon by the creditors, |
| terms. | | | | with agreements in writing so that all parties know |
| 3. Debt conversion, debt-for real-estate swaps, | | | | their rights and obligations. All attorneys and |
| debt-for-development swaps, debt-for-nature | | | | accountants involved should make every effort to |
| swaps, and debt prepayment: the creditor | | | | have the agreement satisfy the requirements of |
| exchanges the debt claim for something of | | | | a disclosure statement under the Bankruptcy |
| economic value on the same debtor. | | | | Code in the event Chapter 13 Bankruptcy is filed. |
| 4. Debt assumption: when a third party is also | | | | This is often referred to as a prepackaged |
| involved. | | | | bankruptcy. |
| A debt reorganization package may involve more | | | | When a homeowner is facing unexpectedly higher |
| than one of the types mentioned above. For | | | | mortgage payments it pays to talk to credit |
| example, most debt reorganization packages that | | | | counselor who can assist the homeowner in |
| include debt forgiveness also result in a | | | | arranging to make lower payments and defer |
| rescheduling of other outstanding debt. Debt | | | | unpaid interest. Debt reorganization options include |
| refinancing transactions also include a balance of | | | | arranging for lower payments on other debt |
| payment portion that is similar to debt | | | | obligations so that higher mortgage payments are |
| rescheduling in that the debt being refinanced is | | | | more manageable. Professional credit counselors |
| extinguished and replaced with a new financial | | | | can also approach lenders to come to an |
| instrument or instruments. | | | | agreement regarding a pending forbearance. |