Because of the terrible state of the housing market, millions of Americans are currently facing the threat of mortgage foreclosure and wondering about their options. For some families, filing for personal bankruptcy may provide some foreclosure relief.
To consult with a bankruptcy lawyer about how filing bankruptcy may provide relief from the threat of foreclosure, fill out the free case review form below.
Foreclosure & Chapter 13 Bankruptcy
One option homeowners may have to prevent or delay foreclosure is to file Chapter 13 bankruptcy. So how might Chapter 13 affect a homeowner facing the threat of losing his or her home? Chapter 13 has a variety of benefits for eligible filers.
- The automatic stay: This legal protection takes effect as soon as a bankruptcy petitioner files her petition with the court and prevents creditors from taking any collection action. Foreclosure falls under the umbrella of actions prohibited under the automatic stay.
- The repayment plan: A major part of Chapter 13 bankruptcy's debt relief is that filers make regular monthly payments over a period of three to five years to become current on their past-due debts. This could help someone who has fallen behind on mortgage payments to catch up on arrearages.
- The debt discharge: Another benefit Chapter 13 might have for struggling homeowners is its debt discharge. The bankruptcy court prioritizes each filer’s debts and distributes money from the repayment plan accordingly. If any of a filer's unsecured debts remain after the duration of the bankruptcy case, those debts might be discharged (that is, entirely excused). This, in turn, might free up money for a filer to funnel toward home payments.
It's important to note that, under current laws, the bankruptcy court cannot actually modify the terms of a filer's mortgage agreement, but may help a filer restructure her finances or get some breathing room from creditors long enough to avoid the stress of foreclosure without alternate housing.
Am I Eligible for Chapter 13 Bankruptcy's Foreclosure Prevention?
Chapter 13 bankruptcy is not a workable foreclosure solution for everyone. In order to benefit from the protections offered by filing for Chapter 13 bankruptcy, you must meet certain requirements:
- You must have a regular income: If you don’t make enough money each month to cover payments to your bankruptcy trustee (as part of the repayment plan) and to make regular mortgage payments, Chapter 13 bankruptcy may not be the best solution for you. Filers who miss payments in their plan risk losing the court's protection.
- Your debt must fall within certain limits: In order to qualify for Chapter 13 protection, your secured debt cannot exceed $1,081,400.00, and your unsecured debt cannot exceed $360,475.00.
Ask a Lawyer about Your Foreclosure Options Today
If you're ready to find out what legal options might offer you the best chance of avoiding, halting or postponing foreclosure, you can connect with a bankruptcy lawyer. Discuss your options and determine the next best steps for you.