R&B and pop Singer Toni Braxton filed bankruptcy for the second time in 12 years in October. Despite selling over 40 million records, she listed between $10-50 million in debts on her Bankruptcy Schedules in her second filing. Braxton filed papers earlier in her bankruptcy notifying the court of her intention to remain in her single-family residence and specifically sought to modify her mortgage to do so.
Her lender, the holder of Braxton's mortgage debt, recently filed documents seeking relief from the automatic stay in the singer's bankruptcy proceeding in order to foreclose or take other actions on Braxton's Duluth, Ga., home the Wall Street Journal reported. Her lender stated that Braxton did not have any equity in the property and that the lender's interest in the property is not adequately protected. The lender stated that Braxton owes $1.5 million on her mortgage while the property is worth $1.2 million.
The problem for Toni is that a bankruptcy judge has no power to modify a mortgage on a primary residence. Bankruptcy laws allow a debtor to pay off any prepetition defaults or arrears over the term of the bankruptcy plan. However, a debtor basically has to stay current on the mortgage going forward. The lender must agree to any changes to the mortgage. The lender in Toni's case seems intent on increasing the pressure on her and unlikely to make any modifications to the mortgage.
If a mortgage is the primary problem pushing you towards bankruptcy, you should strongly consider non-bankruptcy resolutions to the problems before you put all your energies to filing a bankruptcy case. In the Road Out of Debt, we walk you though the steps you should take in order to deal with your mortgage problems, including how to negotiate, different federal programs, and people to consult. Make sure you don't make the mistake of erroneously counting on bankruptcy to save your home if a mortgage is your primary financial problem.
Read more articles about consumer debt by Ted Connolly, co-author of The Road Out of Debt.