Nolo’s Bankruptcy & Foreclosure Blog

The credit bubble is leaking furiously, as shown by skyrocketing foreclosure rates, but it hasn't popped yet. People keep borrowing more, and if they can't borrow on their home equity, they just run up the debt on their credit cards. And if people can't afford to pay their mortgage loans, you can bet they won't be able to pay down their credit cards, which generally have far steeper interest rates and penalties.

To borrow from Winston Churchill, it appears that foreclosures were not the beginning of the end of the credit crisis, but merely the end of the beginning.

Trends in earning, spending, and saving have pointed to a credit crisis for years. It may not end until an unprecedented wave of consumer and small business bankruptcies wipe away the debt that just can't be repaid. Personal bankruptcy rates are already rising -- there were 40% more in 2007 than in 2006, according to the American Bankruptcy Institute. There may come a day, not too far away, when millions of consumers will throw up their hands and walk away from their mountain of unsecured debt by declaring bankruptcy.

You can follow the credit bubble as it shifts and morphs its way through our financial institutions at http://www.federalreserve.gov/releases, where the Federal Reserve posts monthly reports that track the effects of the credit crisis on America's financial infrastructure.

If the flow of money is the fuel of American capitalism, then these reports are the fuel gauge. The Fed's unglamorous reports give us hard data on how much money is coursing through the American economy.

• Monthly G.19 Reports. These are the reports on consumer borrowing, both traditional loans (such as car loans) and "revolving debt," also known as credit cards. Each month, the Fed lists the total amount Americans have on our credit card bills. The amounts are staggering -- $968 billion in credit card debt, more than 7% higher than just last year -- and show no signs of shrinking. Read more at http://www.federalreserve.gov/releases/g19/.
• The "charge off" rate. This is the percent of loans, including credit card balances, that the lender has written off as uncollectible. The latest figures show that banks are giving up on 5.47% of the credit card amounts owed to them. This figure is the highest since the current bankruptcy law took effect, with the exception of a brief flurry of bankruptcies before the passage of the law. More information here: http://www.federalreserve.gov/releases/chargeoff/.
• The savings rate. This data shows how much Americans are saving each year. It's been hovering between zero and 2% for five years: http://research.stlouisfed.org/fred2/series/PSAVERT. For other Fed research data on personal spending, see http://www.bea.gov/national/index.htm#personal.
• The bankruptcy filing rate. This data is kept by the US court system, updated monthly and can be found here: http://www.uscourts.gov/bnkrpctystats/statistics.htm.

You can get other important numbers and information from non-governmental sources, including:

• RealtyTrac, which offers one-stop shopping for the latest foreclosure statistics and news: http://www.realtytrac.com/news-trends/index.html
• InsideARM.com, which offers an excellent, well-organized archive of timely articles on economic data affecting the debt and credit industry. The link below is for Credit Card news, but be sure to hover your cursor over the News & Analysis link for a list of other areas you can search: http://www.insidearm.com/go/tags/credit%20card.

An article titled "Lose Homes, Pay More Tax" by Jonathan Glater, published in the May 30, 2008 edition of the New York Times, accurately described a little-known oddity of our tax laws (described in the article as a "tax bomb"). If a lender forgives or writes off debt (same thing), the amount forgiven can be treated as taxable income by the IRS. So, for instance, if you have a second home (not your primary residence) and you lose it to foreclosure or even a short sale, you will be taxed on the shortfall to the lender. Fortunately, loans made to acquire or improve primary residences are excluded from this rule for tax years 2007 through 2009.

What the Times article left out -- strangely, seeing as so many bankruptcy lawyers were quoted -- is that there are two exceptions to the tax bomb. If you are insolvent at the time of the debt forgiveness, you will also be forgiven your tax liability. And, here's the kicker: If you file bankruptcy prior to the debt forgiveness (read: foreclosure) the bankruptcy will not only hold off the foreclosure (at least temporarily), but also discharge the debt, so there's nothing to forgive and no income to tax.

Insolvency can be difficult to prove after the fact, but there is no doubt about the bankruptcy exception. Although many people shy away from bankruptcy, it can be a marvelous remedy when dealing with the possibility of foreclosure. It's beyond my comprehension why that point wasn't made.

An article on Newsweek's website asserts that chapter 7 bankruptcy filings are following an upward trend, with more and more people seeking bankruptcy protection, despite recent changes to the law making it more difficult to file. Readers of this blog will know that I advocate bankruptcy as a way to avoid foreclosure; according to Newsweek, filing bankruptcy to deal with an imminent foreclosure is one of the reasons for the boom:

In some cases struggling homeowners are filing to prevent foreclosure. (A record high 243,353 homes went into foreclosure in April, according to data released on May 14 by RealtyTrac.) Squeezed by rising costs for everyday necessities like gas and groceries and unable to tap into their homes for temporary relief -- declining values have left some people owing more than their homes are worth; it's also more difficult to get home equity lines of credit or loans -- many people have turned to their credit cards "as a last resort," says Robert Lawless, a professor of law at the University of Illinois who follows bankruptcy trends.

While digging the debt hole deeper seems like it might be a good idea in the short term, filing bankruptcy now will help you avoid the costly penalties that credit card companies will saddle you with as your balance goes ever-upward. If you're thinking of filing for chapter 7 bankruptcy, be sure to visit LegalConsumer.com, my co-blogger's website, to try out his free means test calculator. The calculator can quickly tell you whether you qualify for chapter 7 bankruptcy under the changes in the law that went into effect in early 2008.

As the credit crisis continues and foreclosures continue to rise, Nolo has gathered the most relevant and helpful articles and tools for anyone facing foreclosure. There, you can find articles by me and my colleagues on everything from reducing the number and amount of mortgages on your home, to tips on how to spot the shady characters who will try and take advantage of you at a most vulnerable moment -- when you're struggling to hang on to your home. And, of course, there are answers to those nagging questions that need to be answered immediately -- like how long you can stay in your home once foreclosure notice has been given.

To find out what the law has to say about these issues and more, check out the brand new Foreclosure area on Nolo.com. Soon we'll be adding an article on foreclosure basics and an FAQ with answers to common foreclosure questions.

The subprime mortgage and credit crisis shows no sign of waning anytime soon, and if you're one of the millions being foreclosed on, panic may be quickly setting in. But just because a solution seems unreachable doesn't mean that you can't plan ahead to minimize the possibility of foreclosure or mitigate the damage if you find yourself sliding toward it.

Lately, I've been working with my colleagues at Nolo to produce useful materials that will help anyone in any stage of the foreclosure process -- from those struggling with their new jumbo loan repayments to those with an eviction notice already pasted to their front door. Here are a few of the articles I'd recommend to interested readers:

• My latest article covers the process of reducing your mortgage obligations to help you avoid foreclosure and stay in your home.


• Similarly, Ilona Bray gives you a rundown of all the ways you might be able to stay in your home and keep foreclosure at bay, as well as what to do if you discover that foreclosure is inevitable.


• A cautionary article: Don't Lose Your Home to Foreclosure "Rescue" Scammers. Many unscrupulous people are using the mortgage crisis to prey on those going through one of the most difficult times in their lives. This article gives you the tools to recognize those attempting to defraud you, and how to check up on the legitimate rescuers.


• What happens when your landlord's rental property is being foreclosed upon? Janet Portman provides the information any renter in this situation will need, including warnings about angry, law-breaking landlords and solutions for tenants who find out their new landlord is the bank.

On January 23, I wrote in this blog that people ought to use their rebate check to file bankruptcy. I pointed out that past attempts to stimulate the economy in this manner had pretty much failed, due to the fact that people used the money to pay down their debt, and that this time the loan sharks would gobble up most of the government's gifts hook, line, and sinker.

In an April 25, 2008 Associated Press article by Tom Raum, President Bush is reported to have said the money would help Americans cope with rising gasoline and food prices, as well as aid a slumping economy. According to the article, Sen Charles Schumer (D. N.Y) responded: "It's galling to think that taxpayers' stimulus checks will be lining the pockets of OPEC. The sad truth is that the average American family will spend almost their entire stimulus check on higher gas prices this year."

Let's say it like it is: George Bush (and, not so coincidentally, most of Congress) is giving their oil buddies a $150 billion tax rebate. It may be in your bank account for one brief moment, but it will quickly be recycled into the major oil companies' coffers. All of this takes place in the context of the worst housing slump since the depression, record foreclosure numbers, and a recession in many -- if not all -- states.

My earlier proposal makes even more sense now. It will help folks who really need help and will serve to make our economy stronger. Everyone with significant debt (which is just about everyone) should use his or her rebate check to file for bankruptcy. The entire process can cost as little as $600 for people who represent themselves (which many currently do, with paperwork help from paralegals and targeted legal advice from lawyers). And even if you choose to hire a lawyer to represent you, the proposed rebates will definitely give you a good start on the fees, especially if you are married.

Bankruptcy has been around since biblical times, and has long been recognized as an important component of the capitalist economy in that it restores debtors to the consumer marketplace. Specifically, bankruptcy gets rid of credit card and most other kinds of debt (exceptions are alimony and child support; most student loans; recent taxes; and debts caused by fraudulent or willful and malicious actions). Most people are solvent for the first time in years when they emerge from bankruptcy, and once again are able purchase goods and services without going into more debt.

Just imagine how the economy would hum if consumers were freed from the punishing interest rates that often creep over 30% for technical violations of credit contracts. By filing bankruptcy, people will use their government checks to improve their own balance sheet, instead of donating their money to the oil companies and the fat cats who use the large credit corporations to bleed us dry. While it's true that mass bankruptcy filings would tighten rather than loosen consumer credit, it can't get much tighter. Anyway, it's not a bad idea for us to break our national addiction to debt and learn to pay as we go.

Pretty much every bankruptcy attorney will tell you the same story: When you ask a client why he or she wants to file bankruptcy, the typical answer is, “I can’t stand the phone calls.” I get story after story from normally gregarious people about how they and their families are living in fear of their telephone.

Most people who fall behind on their debts feel guilty, and the debt collectors know it. They prey on that guilt in the expectation that money will somehow be found -- the children will withdraw from college, the daughter will forgo her braces, the mother will take a second job (leaving an empty house for the children to come home to). In the proud tradition of community loan sharks, it makes no difference to the collectors where the money comes from, only that it be paid.

My reaction when I hear these stories? My outer self clucks in sympathy while my inner self gets really furious at the fact that these good people have been made to feel like criminals by the real criminals: The credit card companies that charge 30% interest, trap people into over-payments and delinquencies by unfair billing practices, and raise interest rates on the basis of late payments on unrelated debts.

I also get frustrated because, of the hundreds of people I’ve counseled in the past several years, not one person knew that they could use a federal law known as the Fair Debt Collection Practices Act to stop collection agencies from phoning them -- and from engaging in a lot of other harassing conduct. Whether or not they decide to file for bankruptcy, these people come away from my counseling greatly empowered by a bit of information that every citizen should know at least as well as they know the pledge of allegiance.

And (drum roll, please) the information is, you can make a bill collector bug off with the following letter, properly addressed to the harassing debt collector:

Attn: [Collector],

Re: [Your name], [Account #]

Dear [Collector]: For the past three months I have received several phone calls and letters from you concerning an overdue [Creditor’s name] account. This is my formal notice to you, under Title 15 United States Code Section 1692c, to cease all further communications with me except for the reasons specifically set forth in the federal law. This letter is not meant in any way to be an acknowledgment that I owe this money.

Very truly yours,

[Your name]

The Fair Debt Collection Practices Act has some enforcement teeth, including stiff fines payable to the victim, and attorneys' fees. Unfortunately, it’s sometimes hard to put together a case. The best approach is to start recording your calls, which is okay as long as you tell them you are doing it. This alone may chase them off, but if they are so brazen as to continue calling you after you have told them not to, and they talk for the benefit of the recorder, you may have a good case to take to a lawyer for follow-up.

Unfortunately, the federal Fair Debt Collection Practices Act doesn’t apply to the original creditor, and when creditors own their own collection agencies, as some of the big ones do, the line is gray regarding the federal law’s applicability. Also, there are some collectors that aggressively push the envelope in their collection activities and frequently violate your rights under the Act. Nevertheless, many states have similar laws that do apply to the original creditor and the almost universal effect of a letter such as the one I’ve described above is to stop the harassment, regardless of whether it is the creditor or a collector who is making the calls.

If you're like many homeowners, your home is encumbered with a second or third mortgage (or deed of trust), and perhaps a home equity loan. Numerous articles describe you as using your home like an ATM machine. Having all these secured debts on your home is tantamount to a juggler having too many balls in the air -- at least one must fall, sooner rather than later.

If, for one reason or another, you just can't keep up, you may be able to avoid foreclosure if you pay the right loan and either blow off the rest, or at least make reduced payments. In almost every case, the right loan to stay current on will be your first mortgage or deed of trust. While I'm always hesitant to tell people to stop meeting their shelter obligations in full and on time, sometimes it's the only rational thing to do -- as wrong as it may feel to many of you. If reducing the amount you throw at your home every month will let you stay there and keep your ahead above water, at least until you can work out a better solution, I'm all for it.

How does this work? When you originally took out the loan to buy your home, you agreed to have the loan (or loans) secured by a mortgage or deed of trust (depending on the state where the property is located). (For the rest of this blog, I will use the term "mortgage" to refer to both mortgages and deeds of trust.) By recording the mortgage in your local land records office, the lender created a lien (legal claim) on the property, which can be enforced by foreclosure if the payment terms of the mortgage document aren't met. As you probably know, in foreclosure the property is sold to make good on the promissory note underlying the mortgage.

The main loan you used to buy your home is termed a "first mortgage." Why first? It's almost always recorded first and gets paid first in case of a sale. In the same manner, a second loan secured by the home is a second mortgage. For example, it's common to use a first mortgage to pay 80% of the sale price and get a second mortgage for the additional 20%. And that's not all. In the bubble years, home value appreciation supported additional loans against the home, often in the form of a home equity lines of credit. As with the first mortgage, the lender's primary remedy for a default on these additional loans is foreclosure.

For foreclosure to be an effective enforcement remedy there has to be enough equity in the home to pay off the holder of the loan being foreclosed. And if the home is sold in foreclosure, all senior lien holders (in that a first mortage is senior to a second mortgage) have to be paid off first. For that reason, until the last several years, banks wouldn't lend in the absence of good credit and a healthy chunk of equity to secure the loan. In the bubble years, however, many loans were made on the expectation that values would rise fast enough to provide adequate security for the prospective loan, even if there was no measurable equity at the time. Also, liberal (dare I say "dishonest" or "fraudulent"?) appraisals were easy to come by.

It's easy to see what happened when the crash came. Not only did homes stop appreciating in value, but the values continue to plummet, erasing whatever equity there may have been at the time of the loan as well as erasing the hope of equity to come. Importantly, then, if in your case one or more of the loans on your home has become unsecured-in-fact -- or never was secured to begin with -- skipping payments won't result in a foreclosure action. Sure you may get sued, but the lender's only remedy is to get a money judgment and put another lien on your home, just in case some equity develops in the future. And lawsuits usually take a long time to develop, giving you the opportunity to raise some money from another source and make up the payments or settle with the lender for less than you owe. Remember, the only reasoning for this strategy is the assumption that you can't afford to remain current on your "mortgage debt."

To determine whether the loans on your home are secured or unsecured (as a factual matter), begin with your home's value (be optimistic, but sensible) and subtract the first mortgage. If you hit zero or below, foreclosure is not a viable remedy for the other lenders, since there is no equity left in the home to pay them off. Assume, for example, that your home is worth $400,000. You have a first mortage of $350,000, a second mortgage of $50,000 and home equity line of credit worth $25,000. When you subtract the first and second mortgages from the home's value, you get zero. If you stop making payments on the home equity loan, the lender won't benefit from a foreclosure, since there wouldn't be anything left from the sale after the first and second mortgage holders are paid.

Of course, it's not always that simple. Sometimes a second or third mortgage is partly secured and partly unsecured. In that case, a foreclosure by the junior lien holder might recover some of the lien but not all of it. On the other hand, when foreclosure does occur, in most states it wipes out all the junior liens, regardless of the equity in the home. For instance, in the earlier example, if the owner of the first mortgage foreclosed on the loan, the liens held by the holders of the second mortgage and the home equity line of credit would both be extinguished, even though there was still equity (at least theoretically, since foreclosure sales usually accept bids far lower than the perceived market value).

If you have old, unpaid debts, you may be safe from a lawsuit to collect the debt, because a creditor or debt collector has a limited number of years to sue you for the debt. To get a better understanding of time limits for debt collection, check out this newly published article in the Nolopedia, "Time-Barred Debts: When Collectors Cannot Sue You For Unpaid Debts".

And if you want further information on debt collection & credit, you might also be interested in my previous post, "When Credit Bureaus Report Debts Discharged in Bankruptcy: It Should Be a Crime".

Just about everyone in and out of government is talking about putting cash in the hands of consumers to stimulate the economy. The only real points of disagreement seem to be which consumers and how much. The President wants to rebate taxes to the people who make enough money to pay taxes—the middle- and upper-classes, by definition. Democrats want people who are too poor to pay taxes to also get a piece of the action. The idea, of course, is that the recipients of this largess will kick-start the economy by immediately spending the money on consumer goods and services—appliances, cars, clothing, vacations.

The last time the government sent checks to people to help out the economy was in 2001, and many recipients used the money to pay down their debt and keep the collection agency wolves from their doors. This time around, the national consumer debt has more than doubled—and it is even more likely that the loan sharks will gobble up most of the government's gifts hook, line, and sinker. Maybe increasing the government debt by $100 billion in order to fatten the credit card and consumer finance companies will put some more credit in consumers’ hands—just what we don’t need—but if we follow President Bush’s lead, the folks who own the finance industries will be the ones who ultimately benefit.

Here is a modest proposal that will help folks who really need help as well as make our economy stronger: Everyone with significant credit card debt (which is just about everyone) should use his or her check to file for bankruptcy. The entire process can cost as little as $600 for people who represent themselves (which many currently do, with paperwork help from paralegals and targeted legal advice from lawyers). And even if you choose to hire a lawyer to represent you, the proposed rebates will definitely get you started.

Bankruptcy has been around since biblical times, and has long been recognized as an important component of the capitalist economy in that it restores debtors to the consumer marketplace. Specifically, bankruptcy gets rid of credit card and most other kinds of debt (exceptions are alimony and child support; most student loans; recent taxes; and debts caused by fraudulent or willful and malicious actions). Most people are solvent for the first time in years when they emerge from bankruptcy, and once again are able purchase goods and services without going into more debt. Just imagine how the economy would hum if consumers were freed from the punishing interest rates that often creep over 30% for technical violations of credit contracts.

By filing bankruptcy, people will use their government checks to improve their own balance sheet, instead of donating their money to the fat cats who use the large credit corporations to bleed us dry. While it’s true that mass bankruptcy filings would tighten rather than loosen consumer credit, it’s not a bad idea for us to break our national addiction to debt and learn to pay as we go.

Proposals for dealing with the foreclosure crisis frequently include allowing bankruptcy judges in Chapter 13 cases to modify residential mortgages to bring them in line with the actual value of the debtors' homes, and, where appropriate, reduce the interest rate. This would often result in substantially reduced mortgage payments. At present, only non-residential mortgages can be modified in Chapter 13 bankruptcy.

While this approach to mortgage-debt relief seems helpful on the surface, it has one important flaw. A large number of people facing foreclosure are unable to propose feasible Chapter 13 plans that would be a prerequisite for the proposed relief. Proposals for mortgage debt relief in bankruptcy should include Chapter 7 bankruptcy as well as Chapter 13 bankruptcy.

It of course makes sense to use Chapter 13 as the vehicle for residential mortgage modifications -- Chapter 13 already allows for modification of other types of secured debts, and provides for amortization of mortgage arrears over the life of the plan. However, to extend the relief to the many debtors who can't use Chapter 13, Chapter 7 bankruptcy judges should also be authorized to modify mortgages and interest rates, and fold any arrearages into the newly modified mortgages. This will permit debtors to emerge from Chapter 7 with their home ownership intact, and reap the benefits of lower mortgage payments as part of their fresh start.

Not every person or family would be eligible for this relief. The bankruptcy judge would determine whether the debtor could afford the modified mortgage after bankruptcy. This determination would be based on the debtor's income, income history, and other expenses. If the judge decides that the mortgage would cause the debtor undue hardship or interfere with the debtor's fresh start, the mortgage would remain as is, and the creditor would be given a green light to proceed with the foreclosure. Importantly, this is the same procedure as is already used in in Chapter 7 "discharge hearings" when self-represented debtors seek to reaffirm car notes and other secured debts.

Perhaps using Chapter 7 as well as Chapter 13 bankruptcy for mortgage modifications doesn't go far enough. Maybe a special federal court procedure should be set up where anyone facing foreclosure can apply for relief without having to file any type of bankruptcy. There may be constitutional impediments to modifying mortgages outside of bankruptcy, but, if not, it would be wonderful to have a universal procedure for residential mortgage relief, at least from the standpoint of the millions of borrowers subject to predatory loans and flat-out unaffordable mortgages.

As readers of this blog know, bankruptcy can be used to effectively deal with foreclosure. In keeping with my last post on the subject, I've just published an article in the Nolopedia, Nolo's encyclopedia of free legal information:

"If you are facing foreclosure and cannot work out a deal or other alternative with the lender, bankruptcy may help.

"If you get behind on your mortgage payments, a lender may take steps to foreclose -- that is, enforce the terms of the loan by selling the house at a public auction and taking payment of your loan out of the auction.

"This won’t happen overnight. The foreclosure process typically starts after you fall behind on your payments for at least two months and often three or four. That gives you time to try some alternate measures, such as loan forbearance, a short sale, or a deed in lieu of foreclosure..."

To keep reading, click here.

The media is full of stories about the skyrocketing rates of foreclosure. Often, people believe they can save their home and they scramble to find the best possible way to prevent their home from being taken away. Not uncommonly, however, the handwriting is on the wall—the home will be lost—and the homeowner’s chief concern is how to move on without causing further harm to his or her economic status. In either situation—keep the home or move out—bankruptcy can be an incredibly useful tool in dealing with foreclosure.

What is foreclosure? In California and most other states, a foreclosure starts when you fall behind on your payments for several months. Your lender sends you a Notice of Default giving you a period of time to cure the default—typically three months. If you haven’t caught up by the end of the default period, you are notified that the property will be sold at public auction—on a date scheduled roughly 20 to 30 days later. If you still haven’t adequately dealt with the problem by that date, the property is sold and you can’t get it back unless your state laws provide a redemption period—one last grace period for you to recover the house by paying off the loan being foreclosed on.

Some people facing foreclosure on their home manage to work out a settlement with their lender under which the payments they’ve missed get tacked on to the end of the loan period. Others get their lenders to agree to a short sale—that is, you sell the property for whatever you can get for it and the lender writes off the difference between what you owe and the sale proceeds. If the loans being written off were used to acquire or improve the home, there is no income tax liability. If the loan was used for other purposes (for example, a home equity loan used to fund a vacation) then the amount written off can be considered as taxable income. See New Tax Break for People Who Default on Their Mortgages.

Bankruptcy may provide some relief. At the point you are faced with the forced sale of your property, you will undoubtedly start thinking about bankruptcy if you haven’t before. Bankruptcy may help you keep your home or, if that’s not in the cards, at least get you out from under your mortgage without liabliity for the deficiency (the difference between what you owe and what the property is ultimately sold for). And bankruptcy also eliminates any tax liability you might have for loans taken out against the property for purposes other than property improvement. By delaying the foreclosure process, it can also help you save some money to deal with the aftermath of your bankruptcy.

When you file bankruptcy, the foreclosure process comes to a halt (called the "automatic stay") and remains that way until your bankruptcy case comes to an end or the lender obtains court permission to proceed (called “lifting the stay”).

There are two types of bankruptcy—Chapter 7 and Chapter 13.

Chapter 7 bankruptcy. Chapter 7 is the most popular type for getting rid of debts. However, a Chapter 7 bankruptcy typically lasts for only four months—after which the foreclosure can resume. And if the court grants the lender permission to continue the foreclosure while your bankruptcy case is pending, you have even less time. In short, Chapter 7 won’t prevent an ultimate foreclosure—although for the time the process is delayed you can live in your home for free and amass a savings that can help you find a new dwelling.

In addition to getting rid of unsecured debt, such as credit card and medical debts, Chapter 7 bankruptcy will also get rid of your mortgage debt (and exempt you from tax liability for the loss incurred by the lender in the foreclosure sale in case the loss involved a loan that wasn't used to acquire or improve the property. As mentioned, write offs on loans used to acquire or improve a principal residence no longer generate income tax liability).

Chapter 13 bankruptcy. Chapter 13 bankruptcy is a different animal altogether. You can actually defeat the foreclosure by proposing a plan to pay off mortgage arrears over time. For example, assume you are $10,000 behind on your mortgage. You file a Chapter 13 bankruptcy and propose a plan under which you will make current paymnts on your mortgage and additionally pay off the $10,000 arrears at a rate of $277 per month over three yea