Hurricane season is right around the corner. However, many in the Fort Myers area are still dealing with the devastation of Hurricane Ian in late October 2022. Hurricane Ian left a path of destruction estimated between $40 billion and $71 billion.
The aftermath of a hurricane can be a stressful time for homeowners. Not only are you dealing with the physical damage to your property, but you may also be facing financial difficulties due to the cost of repairs and potential loss of income. For most in the Fort Myers, southwest Florida area, the thought of paying your mortgage may have become overwhelming. You may still be grappling with many expenses that make it challenging to keep up with everyday expenses, especially your mortgage. You may still be waiting on an insurance adjuster to get to your home or waiting on the insurance check. You may be faced with paying rent and paying your mortgage. You are not alone. None of this is your fault. It’s important to remember during these times that this was an act of nature. To ease some of this burden, you may consider taking advantage of a mortgage deferral or forbearance your mortgage lender offers. However, both come with pitfalls and should be avoided if possible. Let’s take a deeper look at both options.
The term mortgage deferment is sometimes used interchangeably with mortgage forbearance. However, the two are not the same. You aren’t required to choose between the two; they work hand in hand. But they are not the same.
A mortgage deferment is an agreement between you and your lender to postpone your mortgage payments for a specific period. During this time, you will not be required to make payments. However, your interest will continue to accrue on your outstanding balance, and you will be responsible for paying it in the future.
Mortgage deferments can help you manage short-term financial issues. They allow your focus to be placed on immediate needs, such as essential expenses like food, utilities, and possibly rent after a hurricane. In addition, by deferring your mortgage payments, you avoid the risk of defaulting on your loan.
It is important to remember that a deferment is not a long-term solution. It is still your responsibility to pay the deferred payments at the end of the loan, along with any accrued interest. This means that you are committing yourself to future financial obligations where the payments may be larger than what you were paying before. And you may be in debt longer than initially planned.
Mortgage forbearance is another option you may consider during these uncertain financial times. You can temporarily suspend your mortgage payments during financial hardships with a forbearance. In addition, pausing your mortgage payments could help you cover other necessities like rent.
Mortgage forbearances allow you flexibility to deal with unforeseen financial hardships. However, it will not erase your obligation to pay your mortgage. As a result, you may be faced with making a large lump-sum payment at the end of the forbearance period. In addition, depending on the type of forbearance your lender offers, it may be reported to credit agencies. This could have a negative effect on your credit score and your ability to borrow in the future.
The most significant difference between a mortgage deferral and forbearance is how the deferred payments are handled. In a deferral, payments are pushed back to a later date, and you must pay them back in full at the time. On the other hand, forbearance payments are temporarily reduced or suspended, but you are required to pay them back later.
Another difference is the length of time that you can defer or suspend your payments. Deferral periods are typically shorter than forbearance periods, with deferrals lasting from a few months to a year, while forbearance can last up to 18 months.
Deferrals and forbearances may seem like your only options. However, they are only short-term remedies for longer-term financial issues. If you lost your home during Hurricane Ian, a mortgage deferral or forbearance could make it easier to manage finances and provide for your family in the short term. But what happens when your forbearance runs out at the end of those few months? Are you able to make the large lump-sum payment? You could face that if you chose not to include a deferment at the end. If you and your family are still in limbo with insurance, paying rent, and struggling to continue necessities, making that lump-sum payment could be impossible. Deferrals may have the same unexpected outcome. You may face larger payments, higher interest, and a longer loan term. When you are fighting to maintain, those payments can cause additional financial burdens and push you into foreclosure.
Foreclosure can be devastating and expensive. You risk losing your home and be negatively impacted regarding your future credit and borrowing.
The half-year mark following Hurricane Ian is upon us. And many of our Fort Myers and Southwest Florida residents are still trying to recover. You aren’t alone if you have been struggling to make your mortgage payment while waiting on insurance adjusters and insurance checks.
If you have chosen to use a mortgage deferral or forbearance, those payments could be due at this point, depending on your chosen length. In addition, are you still having to pay rent while your home is uninhabitable? These things can stack up, making it impossible to pay your mortgage payments again.
Remember, you are not alone. Millions of families were impacted in Fort Myers and surrounding areas.
You do not have to face this alone. If you are now facing financial uncertainty, there is help. Chapter 13 bankruptcy is an option that can help you keep your home and manage any other debt you have while trying to navigate these difficult circumstances.
Chapter 13 bankruptcy is the type of bankruptcy that allows you to reorganize your debts over a three-to-five-year payment plan. For example, if you are struggling to keep up with your mortgage payments following Hurricane Ian, Chapter 13 can be a practical option to help you keep your home.
Chapter 13 allows you to catch up on missed mortgage payments over time. If you are behind on your payments, you can include them in your Chapter 13 repayment plan, which will allow you to catch them up over the course of your repayment plan.
Filing for Chapter 13 bankruptcy may also help you avoid foreclosure. When you file for bankruptcy, the court places an automatic stay in place, preventing your mortgage lender from foreclosing on your home without leave of the Bankruptcy Court. So, as long as you stay current on your Chapter 13 plan payments, you should be able to keep your home.
Chapter 13 bankruptcy can be effective for anyone struggling following Hurricane Ian. However, if you are considering bankruptcy, speaking to an experienced bankruptcy attorney is essential to explore your options and determine what road to recovery is best for you and your unique situation. Miller, Hollander, and Jeda are your go-to Fort Myers bankruptcy attorneys. They understand the fight you are in to recover. Contact them today to get started on your path to financial freedom.