Chapter 13 Bankruptcy May Stop Foreclosure
Filing Chapter 13 Bankruptcy to Keep Your Home
Owning a home has always been a part of the American dream; unfortunately, losing a home has become an American nightmare.
If you’re facing the threat of home foreclosure, you’re not alone. As of March 2009, studies show a foreclosure occurs every 13 seconds.
If you are like many other Americans facing mortgage foreclosure, you can investigate your options to keep your home, which include filing Chapter 13 bankruptcy.
Chapter 13 bankruptcy works to help consumers who may have fallen behind on their mortgage payments due to sudden illnesses, job losses, medical emergencies or other setbacks. Chapter 13 may allow filers to keep their homes by establishing a repayment period in which they can catch up on those payments over time.
The following page further examines how Chapter 13 bankruptcy works to help stop foreclosure. To learn more - connect with a local bankruptcy attorney today.
All you have to do is fill out the below form or call us at 888-632-0587 and we’ll connect you with a local Chapter 13 bankruptcy lawyer--for free and with no obligation.
Examining Your Mortgage Foreclosure
Before we delve into how Chapter 13 bankruptcy may help you stop foreclosure, it is a good idea to examine what exactly is mortgage foreclosure and when it is typically initiated.
Foreclosure refers to when a bank or mortgage company that has a lien (a claim, or mortgage) on a piece of property takes the property back because the borrower/property owner has not complied with the terms of the agreement.
A foreclosure proceeding is typically initiated when the borrower gets behind on payments, most often when payments have been late for more than 16 days.
With this considered, if you have fallen behind on your mortgage payments and are now facing foreclosure, filing Chapter 13 bankruptcy is something that you may want to consider when seeking to keep your home.
How Chapter 13 Bankruptcy Can Help with Foreclosure
Chapter 13 bankruptcy works in several ways to help you stop foreclosure:
- upon filing Chapter 13 bankruptcy, an automatic stay is entered, which may halt any further foreclosure proceedings against your home; the automatic stay is a court order that makes it illegal for your lender or bank to continue foreclosing on your property during your Chapter 13 case or until the court lifts the automatic stay;
- with the automatic stay in effect, you will be given more time to sit down with your Chapter 13 bankruptcy lawyer and figure out a repayment plan; more specifically, within 15 days of filing Chapter 13 bankruptcy, you must file a proposed Chapter 13 repayment plan stating your income, allowable living expenses and proposed payments to the trustee for your creditors;
- with a Chapter 13 repayment plan, you may be given anywhere from 3-5 years to catch up on your past-due mortgage debt;
- as long as you make your regular monthly mortgage payments on time, pay back your past-due mortgage debts to your bankruptcy trustee according to the terms and conditions of your repayment plan, and catch up on your payments by the end of your Chapter 13 plan repayment period, you may be able to keep your home. Failing to make timely payments and satisfy the terms of your plan may result in the automatic stay being lifted and also lead to the continuation of the foreclosure proceeding.
Can You File Chapter 13 Bankruptcy to Stop Foreclosure?
Generally speaking, you may file Chapter 13 bankruptcy to stop foreclosure if you:
- are employed
- have a regular income
- demonstrate the ability to keep current on your Chapter 13 repayment plan payments
- show that you can stay on top of your monthly mortgage payments and other necessary living expenses in addition to your repayment plan payments
- do not have debts that exceed statutory Chapter 13 limits of more than $360,475 in unsecured debts and $1,081,400 in secured debts (which a local bankruptcy lawyer can explain to you in more detail)
Other Ways to Stop Foreclosure
Besides filing bankruptcy, you may be able to stop foreclosure on your home via other means:
In simple terms, refinancing refers to replacing an existing debt obligation with a new debt obligation bearing new terms. If you have significant equity in your home and do not want to file Chapter 13 bankruptcy, refinancing may be a good choice for you. Unfortunately, refinancing is not as easy for many homeowners who have adjustable-rate mortgages or interest-only loans and lack a lot of equity in their homes. With that said, you should know that this means to avoiding foreclosure may not be a realistic option if your loan has been past-due for 90 days.
Deed in Lieu of Foreclosure
If you do not think that you can realistically pay back your mortgage debt, you may be able to come to terms with your mortgage holder and turn over the deed of your home in exchange for the cancellation of your debts. While this will not allow you to keep your home, it can stop foreclosure if the mortgage holder is to agree with such an arrangement.
Sell Your Home
If you have a lot of equity in your home, selling it may allow you to stop foreclosure and actually leave with money in your pocket. However, if you don’t have a lot of equity in your home, it may be hard to sell your home and cover the additional costs that come with putting your home on the market.
A Short Sale
Piggybacking off the alternative of selling your home, your mortgage holder may agree to a short sale, meaning that he or she will accept less than the full amount of your mortgage. A short sale would allow the mortgage holder to get a bulk amount on the mortgage and not to have continue with the foreclosure proceeding. For you, a short sale would allow you to stop foreclosure and avoid a deficiency judgment.
Speak with a Local Chapter 13 Bankruptcy
You’ve probably put a lot of work into your home and you owe it to yourself to do all that is possible to stop foreclosure and keep this prized possession.
Getting in touch with a Chapter 13 bankruptcy attorney near you can be a good way to explore whether this form of personal bankruptcy protection may help you stop foreclosure and keep your home.
At Bankruptcy.Me, we can help connect you with a nearby Chapter 13 bankruptcy lawyer – all you have to do is fill out our free bankruptcy case review form or call 888-632-0587.
The above synopsis of bankruptcy laws is by no means all-inclusive and it is not intended to provide legal advice. These laws may have changed since our last update and there may be additional laws that apply in your situation. For the latest information on these bankruptcy laws, please contact a local bankruptcy lawyer in your area.