BLOG: Chapter 13 Bankruptcy and Saving Your Home From Foreclosure

The school year is 2 weeks in for most students, and the bills are steadily mounting for everyone, especially parents.  You have to pay for afterschool activities, lunch money, uniforms, new clothing and shoes, flu shots, and more. For many, bills are insurmountable and their homes are in danger of foreclosure. They try to buy themselves more time, but know that eventually, they will lose their homes.

Chapter 13 Bankruptcy is a great option for people who want to save their homes from a foreclosure.  A Chapter 13 Bankruptcy will not stop a foreclosure, but it can delay it for a little while.

Once any Bankruptcy is filed, whether it be a chapter 7 or 13, for consumers, an automatic stay is put into place so that creditor's must stop all collection activity of debts.  This includes any activity by banks to foreclose on homes.  Many people live in their homes for months and even years without paying their mortgage before receiving a notice to foreclose by their lender.  If you have received that letter, your lender is in the process of foreclosing on your home and will provide you will a date that they plan to sale the property.  If you filed a Chapter 13 Bankruptcy before the date of sale is reached, the sale will be postponed while the Bankruptcy is in a pending status.  This time period can vary from 90 days-120 days.  If you've filed for a Chapter 7 Bankruptcy, this will buy you some time to live in your home for free while your Bankruptcy and discharge is pending.  During this time it is urged to save your money to relocate yourself and/or your family.

In certain instances your lender will ask the court for permission to lift the automatic stay that filing for bankruptcy provides.  If that permission is granted, the sale of your home may occur in a couple months time.

Filing for Chapter 13 Bankruptcy to save your home will NOT be an option for everyone. In paying your Chapter 13 payment plan, the arrears on your mortgage are included along with all of your other debts.  It is paid down according to your disposable income (what is left after your mortgage, car note, and living expenses according to the federal guidelines and household size are taken into account). You would have to still pay your mortgage at the rate it was at ALONG WITH your Chapter 13 payment plan monthly. So if you cannot afford your mortgage at the price it is at, many consumers prefer to attempt a loan modification while in their bankruptcy.

For a determination of whether you qualify and can afford a Chapter 13 Bankruptcy to save your home from foreclosure, please contact us, Smith Legal Services, LLC. at www.mysmithlegal.com or 240-245-0015.