The automatic stay is one of the most significant protections for consumers who file for bankruptcy.
Filing a bankruptcy petition automatically stops or stays most collection actions.
Creditors cannot collect on a debt during the bankruptcy case, including proceeding with foreclosure measures.
Thus, filing Chapter 13 bankruptcy stops foreclosure so long as the public sale has not yet occurred.
Today, our bankruptcy attorney will discuss how filing chapter 13 bankruptcy to avoid foreclosure works.
Once you know the process, the next step is to call the attorney’s at Blake Goodman, PC, Attorney.
During your free consultation, a bankruptcy attorney will listen to your situation and advise you on the best options for debt relief.
Contact us today to get started.
What Happens in a Chapter 13 Bankruptcy?
Chapter 13 bankruptcy requires you to make a plan to repay some or all of your debts. The plan must be approved by a bankruptcy judge and usually lasts three to five years.
When you make all the payments, you can receive a discharge (forgiveness) of certain debts, including credit card and medical debt.
However, if you want to keep your home, your primary mortgage debt will not be forgiven.
If you have a second or third (junior) mortgage, you could have these debts “crammed down” or forgiven.
Bankruptcy Under Chapter 13 and Foreclosure
The benefit of filing Chapter 13 bankruptcy with a foreclosure on the horizon is that you can repay the missed payments over the life of the plan.
Bankruptcy attorneys refer to the amount you are behind in mortgage payments as the “arrearage.”
To keep your home, your plan must include two payments toward the mortgage: one to bring the arrearage up to date and one for the regular mortgage payment.
If you have equity in your home (meaning its value exceeds the amount you owe), you will also have to pledge that amount toward payments under the plan.
Why Do I Need to Continue Making Mortgage Payments in Chapter 13 Bankruptcy to Keep Out of Foreclosure?
For the court to approve your Chapter 13 plan, you must include payments to compensate secured creditors in full.
Secured creditors are those whose loans are “secured” by collateral, such as a car payment or mortgage.
If you fall behind on your payments, secured creditors have the right to repossess the collateral according to your mortgage agreement.
To avoid repossession, you must continue to make your regular mortgage payments as they come due, even if payments extend past the life of the plan.
Does chapter 13 bankruptcy stop foreclosure?
While everyone’s situation is unique, anyone facing financial troubles can feel stressed and embarrassed. Filing for bankruptcy can offer the relief that you need.
Our bankruptcy attorney has supported over 8,000 Hawaiians through bankruptcy.
Contact us today, and our efficient professionals will help you move forward with your debt relief journey.