How Chapter 13 Bankruptcy Can Stop Foreclosure on Your Home
If you are in default on your mortgage and facing foreclosure, filing for bankruptcy could delay the proceedings. In most states, once you file for bankruptcy, it will put a stop to the foreclosure sale of your home. In fact, filing for bankruptcy puts a stop to all collection activity, which means creditors can no longer attempt to collect unpaid debts until the courts resolve your bankruptcy. Here are some facts on the two most common forms of bankruptcy, chapter 7 and chapter 13, and how they can stop foreclosure on your home.
How Filing for Bankruptcy Halts a Foreclosure
Bankruptcy laws contain a provision known as an automatic stay. Once you file bankruptcy with the court, all collection calls, evictions, repossessions or foreclosures must stop. If your mortgage holder schedules a date to hold a foreclosure sale, your lender must postpone that sale once you have legally filed for bankruptcy. In most cases, it will take three or more months to complete your case. Some lenders do file a motion to have the courts lift the automatic stay, but it can take a couple of months before the court will hear the motion. At a minimum, filing for bankruptcy can stop a foreclosure for two months.
How to Save Your Home With Chapter 13 Bankruptcy
If you want to save your home and are willing to do whatever you can to stay in your house for the foreseeable future, chapter 13 bankruptcy can help. Aside from making your mortgage payments current, the only way to save your home to avoid foreclosure is through a chapter 13 filing. Here is a closer look at how it works.
Under chapter 13, you will pay your delinquent accounts under a repayment plan outlined by the courts. The repayment plan can include your delinquent mortgage payments. Most cases allow you to repay your debt in five years. However, it is up to the court to decide the repayment plan based on your income and other factors, including the amount of your debt and whether or not you are filing as an individual or business.
Filing Bankruptcy Under Chapter 13
You must first file a petition with the courts that handle bankruptcy in your jurisdiction. The courts require that you pay a filing fee, which can cost as much as $310. After you file the petition, the bankruptcy judge will appoint a trustee who oversees your finances. The trustee will monitor your payments and make various payments to debtors based on your repayment plan. Chapter 13 requires that you give all your disposable income information to the courts, and you must pay all of your creditors who provided you with unsecured loans the amount you owe.
Your Property and Chapter 13
Chapter 13 bankruptcy does not force you to give up any property during the repayment period. However, you must make all your payments on time, including your monthly mortgage obligation, car loan payments or any other secured loan payments. If you do not pay your monthly obligations, the courts will allow your lender to foreclose on your home or force you to give up any other property.
Once you meet the obligations of your repayment plan under chapter 13 bankruptcy, the court will discharge your case, and you are free to move forward with your finances how you see fit. Keep in mind that you must keep up with any alimony or child support obligations while you are under a repayment plan. Both chapter 7 and chapter 13 bankruptcy requires several steps that you must complete before you can file, so it is best to speak with an expert before you try to file on your own.