How
to Avoid or Delay Foreclosure using Chapter 13 Bankruptcy
If you are facing the
prospect of losing your home, you can seek Chapter 13
Bankruptcy
protection to avoid or at the least delay foreclosure of your home.
When all other alternatives on working out a deal with your lender
fail, bankruptcy might be able to help you. A lender may initiate
foreclosure proceedings once you start falling behind on your mortgage
payments consecutively for two to four months. If other steps to stop a
foreclosure like a deed in lieu of foreclosure, loan forbearance or a
short sale have failed, then bankruptcy can be used as an option to
avoid or stall foreclosure.
Benefits
of Filing Bankruptcy Filing a Chapter 13
bankruptcy (or even Chapter 7) would make the court issue an
‘automatic stay’ on all activities, effectively
postponing the foreclosure sale. While the bankruptcy is pending, the
sale would be postponed for about three to four months. The lender can
however file a ‘motion to lift the stay’. Even
under those circumstances, the sale might at least be postponed by two
months, buying you valuable time. Also, if a foreclosure notice has
already been filed notifying you a few months ahead of time, then the
notice would have precedence over the ‘automatic
stay’ clause.
If you are determined
to keep your home but at the same time don’t have a feasible
way to get current on your mortgage payments, filing a Chapter 13
bankruptcy could be the only option left to keep your home.
How
Chapter 13 works Chapter 13 Bankruptcy
allows you to propose a repayment plan to pay back the late, unpaid
payments over a period of three to five years, depending on the size of
your debts and your income. However, you must have the required income
to pay off the due amount as well as pay your current mortgage payments
simultaneously. As long as you are able to meet this financial
obligation, you can keep your home and avoid foreclosure.
Chapter 13 Bankruptcy
can sometimes also help you to get rid of your second or third mortgage
by recategorizing them as unsecured debt. Under Chapter 13, unsecured
debts take last priority and most often need not be paid back at all.
