Your home and Chapter 13
Are you behind on your mortgage payments? If you’ve fallen on hard times and you’re trying to figure out how in the world you are going to afford to stay in your home then it really may make sense to look into Chapter 13 bankruptcy. Chapter 13 can offer you more time to get current on your mortgage and keep your home.
A special note: If your intention is to keep your home than before even considering Chapter 13 it may be in your best interest to attempt to negotiate new terms directly with your lender. Lenders sometimes find it is in their best interest to come up with a workout plan that will benefit you and them as opposed to having you file for bankruptcy. The lender may agree to renegotiate payments terms by modifying the loan or refinancing.
Are you about to be foreclosed on? This can be a great tool to delay or prevent foreclosure.
It is even possible to have your 2nd or 3rd mortgages eliminated.
Can I keep my home?
Chapter 13 will allow you to set up a repayment plan (usually 3 – 5 years) for any missed payments on your mortgage so you can keep your home. Assuming you have the income to make your current mortgage payments along with your other basic expenses and you pay all the repayment plans then you keep your home.
What do you mean I can eliminate my 2nd or 3rd Mortgage?
This can be a strategy that can really help you in the short-term by eliminating monthly payments and long-term commitments to your “underwater” property. If your property value has decreased in value below your 1st mortgage then your 2nd and or 3rd mortgages have no equity and are now considered unsecured. Unsecured debt takes last priority in getting paid back. Now the bankruptcy court may do a “lien strip” on your unsecured debt allowing them to be effectively wiped out, as most unsecured debts are usually not paid in full and some instances don’t have to be paid at all.
How do I stop foreclosure proceedings?
Once you file for Chapter 13 protection all foreclosure proceedings will stop until your repayment plan, has been approved by the court. This is called an “automatic stay.” If you are behind on your mortgage payments then a plan needs to be put in place to repay your mortgage arrears. Assuming you make your monthly mortgage payments and your bankruptcy payments then your lender cannot foreclose on your home.
A sidenote: There is one exception to the automatic stay rule. In order to stop people from filing a bunch of bankruptcies in a row to stall the foreclosure process the courts have said if you filed a bankruptcy within 2 years before your filing of this one and the automatic stay was removed by a lender seeking foreclosure then you will be denied an automatic stay and your home will move forward with foreclosure proceedings.
For more information regarding the benefits of filing Chapter 13 bankruptcy check out these links: