Saving a Home From Foreclosure With Chapter 13 Bankruptcy
Many people are struggling in the current economic climate. Many live paycheck to paycheck, barely making ends meet. All it takes is for one unexpected emergency to send them into financial tailspin, with bills piling up faster than they can pay. When people feel like their finances are out of control, many fear losing their homes more than anything. People should be aware that they can prevent or stop foreclosure by filing Chapter 13 bankruptcy.
How Chapter 13 Works
Chapter 13 is often called wage earner’s bankruptcy, since those who file use their monthly income to repay their debts over time in an approved repayment plan lasting three to five years. The debtor works with the trustee and the creditors to come up with a schedule where the debtor pays a fixed amount each month to the Trustee, who distributes money to the creditors. In many cases, the debtors can negotiate with creditors so the debtors end up repaying only a portion of the amount they owe.
At the end of the repayment plan, if the debtor has remained current with the monthly payments, the debtor receives a discharge from personal liability for any debt that remains.
Saving a Home With Chapter 13
People often can save their homes from foreclosure by filing Chapter 13. When a person files a bankruptcy petition, the court issues an automatic stay on all collection actions so the Trustee has time to examine the debtor’s finances and see which creditors have priority in repayment. The stay includes foreclosure actions.
Debtors can also work with their mortgage lenders to repay late or missed mortgage payments. Lenders may also agree to waive penalties or lower interest rates. In addition, since debtors pay fixed amounts each month based on their income, many find it easier to make their mortgage payments during the repayment plan.
A debtor needs to make sure to remain current with mortgage payments during the repayment plan, or the mortgage lender can petition the court to lift the automatic stay and can commence with foreclosure.
Consult an Attorney
If you are overwhelmed with debt and are afraid of losing your home to foreclosure, consult and experienced bankruptcy attorney who can discuss your situation with you and advise you of your options.