While fewer homeowners are behind on their mortgage payments, the number in default is still well above average, reports the New York Times.
By the end of 2011, one in every eight U.S. homeowners was either in trouble with their mortgage or already in foreclosure.
People tend to miss their first payment deadline due to an unexpected financial pinch, such as a costly car repair or temporary unemployment. Most of us believe that once we recover, we'll be able to get right back on track.
Unfortunately, many homeowners forget to factor in the fees and credit damage that come with that single late payment.
The NY Times article attempts to explain the importance of payment deadlines - and how missing those deadlines hurt your chances of ultimately keeping your home.
The Grace Period
Many of us have heard of a lender's grace period, but don't quite understand how it works. Technically, a house payment is usually due on the first of the month - but some lenders allow a 15-day grace period. The catch is that lenders are super strict about when this period ends.
If your check is received a day after the 15th, you could be charged a late fee of up to 5 percent of your payment. That means that next month you'll owe two full payments, plus the penalty. It doesn't take long to understand how one late payment can put a borrower on a downward spiral to delinquency.
Effect on Credit
Many homeowners who are in financial trouble avoid seeking help from Chicago bankruptcy because they worry about the effect a bankruptcy filing will have on their score.
What they don't realize is that their credit score may already be tarnished from late mortgage payments - and bankruptcy may be the only way to get back on track.
If you are 30 days late on a payment, your lender sends a report to credit bureaus, which results in a mark on your credit score that will remain for 7 years. It doesn't matter how clean your record was prior to your tardy payment - or how quickly you rebound afterward.
A single late payment can drop your score by 100 points or more, and your number will continue to decline until you hand over the money. The more late payments, the worse your credit record.
While bankruptcy will also appear on your credit report, filing for Chapter 13 has the ability to improve your financial situation so that you can stay current on future payments.
According to the Times article, people who can resolve their tardy payments between 90 and 120 days' delinquency have the best shot at avoiding foreclosure. Unfortunately, when that many late fees have accumulated, it can be extremely difficult to recover the ability to make payments.
The best way to pull your family out of a financial hole is to avoid falling into the downward spiral in the first place. Filing for Chicago bankruptcy may be your best chance.
To learn more about bankruptcy's power to stop foreclosure, consider speaking with one of our professional Chicago bankruptcy attorneys. Call the DebtStoppers Bankruptcy Law Firm at 800-440-7235 today for a free debt analysis.
More Blog Entries:
Mortgages: Paying on Time, by Vickie Elmer, The New York Times