Filing a Chapter 13 bankruptcy and using the payment plan it offers has become a common method for people to stop or avoid foreclosure by using the bankruptcy laws in their state to their advantage.
For many people today, if they have a mortgage, the payment on their mortgage is a significant portion of their monthly income. And it is not unusual for people to have little in the way of savings to help continue making their monthly mortgage payment should financial issues arise. If this is true of you and you lose your job, it will not take long for you to fall behind on your mortgage payment. If you are unable to find work and continue to miss mortgage payments, your mortgage company will likely begin the foreclosure process.
Foreclosure is a legal process where your mortgage company seizes your home and sells it—possibly at an auction or by listing it through a realtor—to satisfy as much of the mortgage amount as they can. In the process, you will be evicted from your home, forcing you to find a new home.
The foreclosure process can take several months, depending on your lender, your relationship with them, and perhaps most importantly the financial climate. Five years ago foreclosures generally took only three or four months, now it is not unusual for foreclosures to take twice that long or longer, simply because there are so many more foreclosures that the financial institutions cannot work through them quickly.
Regardless of the length of time a foreclosure takes, if you want to stop foreclosure, one option you can consider is filing bankruptcy. A Chapter 13 bankruptcy is the most common type of bankruptcy used by people wanting to avoid foreclosure; it allows them to restructure the past due mortgage payments they owe into a payment plan that can run for up to five years. When you are filing bankruptcy, the bankruptcy court will issue to your mortgage company an automatic stay. This means that the mortgage company must cease collection activities and suspend the sale process on your home while the bankruptcy proceedings are completed and you work out the details of your payment plan. Meanwhile, you must submit a payment plan to the bankruptcy court outlining how you will catch up on your past due payments, which must be approved by the bankruptcy court.
In addition, a Chapter 13 bankruptcy can help eliminate your unsecured debt. This can include credit card debt as well as debt related to a second mortgage on your property, in cases where the value of your home has fallen such that it is only enough to secure your primary mortgage. The elimination of unsecured debt through a Chapter 13 bankruptcy can often help because you will need less money in total each month, money you can now dedicate to paying your monthly mortgage.
But keep in mind that the automatic stay issued as a part of a Chapter 13 bankruptcy is only a temporary way to stop foreclosure. Therefore, during the months you have as the foreclosure and bankruptcy process happen, you need to be actively finding a way to start making your mortgage payments again, as well as your payment plan payments.
The mortgage company can file with the bankruptcy court a petition to lift the automatic stay early, allowing the sale to continue. If the bankruptcy court does not believe you are likely to have the financial means to submit and follow a reasonable payment plan, the bankruptcy court may allow the foreclosure sale to proceed.
Remember that the information above is general in nature. If you are facing foreclosure and are considering Chapter 13 bankruptcy as an option to avoid foreclosure, you should understand how the bankruptcy laws work in your state. For additional information about bankruptcy and if you want to seek help with your situation from a bankruptcy attorney, please visit http://www.
