Bankruptcy can be used to stop foreclosure permanently or temporarily. When you file for bankruptcy, an automatic stay will be issued, which will force your home credit company to stop all collection actions, including foreclosure. You will have additional time in your home to catch up on payments.

How Does Chapter 13 Stop Foreclosure?

Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” allows you to create a three-to five-year payment plan to repay creditors over time. This plan is best for debtors who have enough income to cover their current bills while slowly eliminating past due debt.

A foreclosure action is often started by a bank or lender when you are past due on mortgage payments, also called arrearage. Those past due payments can be included in your Chapter 13 payment plan, allowing you extra time to catch up.

Who Determines the Repayment Plan for a Mortgage?

You and your attorney will be able to present a repayment plan to your bankruptcy trustee and the court. This allows you to repay what is more comfortable instead of the mortgage company forcing you into a payment plan that is difficult or impossible for you.

What Is an Automatic Stay??

An automatic stay is an order issued by the court forcing all creditor collection actions to stop while you are in the process of a Chapter 13 bankruptcy. This includes foreclosure. If the bank or lender was trying to foreclose on your home and force you to move out, the automatic stay will stop that process. It will give you time to catch up on payments and keep your home.

Will I Have to Pay More Than What I Owe on My Mortgage?

No. When you include your mortgage in your Chapter 13 bankruptcy payment plan, you will not have to pay late fees, interest, and other penalties. This will likely save you a significant amount of money, which will help you get back on track faster. Your payments will be applied directly to the past due amount and additional fees will stop being accrued.

What Happens to Mortgage After Chapter 13 Discharge?

Some debts can be discharged after your Chapter 13 payment plan is complete. However, a mortgage or housing payment cannot be discharged after Chapter 13 bankruptcy. You will have to keep paying your mortgage if you want to keep your home after your Chapter 13 obligations have been completed.

Does Bankruptcy Clear Housing Debt?

Housing debt, such as a mortgage, may be eliminated or discharged through Chapter 7 bankruptcy. However, if you choose to clear your mortgage through bankruptcy, you will likely have to give up your house. If you include your mortgage in a Chapter 13 bankruptcy payment plan, then you can use the time to catch up on past due payments, get back on track, and keep your home. Both of these options are valid depending on your specific situation.

Remain Current on Future Mortgage Payments

While your Chapter 13 bankruptcy can help you pay off past due amounts that you owe, it’s important to continue paying future mortgage payments on time. This will result in a double payment to your mortgage lender while you are in the Chapter 13 process. However, this situation will be considered when you develop your payment plan and your bankruptcy attorney can help you ensure that you have enough income to cover all your bills, including your mortgage, along with the Chapter 13 repayment plan. If you can successfully keep up with ongoing mortgage payments as well as your payment plan, you will be able to stop foreclosure and keep your home.

Can Chapter 7 Bankruptcy Help Me Avoid Foreclosure?

Chapter 7 bankruptcy is different than Chapter 13. In a Chapter 7 bankruptcy, an individual often sells their assets to repay debts. They often lose their home in order to pay what is past due or remaining on their mortgage. However, filing Chapter 7 can give you extra time to work with your mortgage lender or find a new home.

As with Chapter 13, when you file for Chapter 7 bankruptcy, the court will issue an automatic stay. This will halt the foreclosure process. It is possible for the lender to request a Motion for Relief from the automatic stay. If they are successful, the mortgage lender may return to state court and resume the foreclosure process. Filing for Chapter 7 bankruptcy will ensure an automatic stay for at least 45 days, and in many cases much longer.

While a Chapter 7 cannot save your home the way a Chapter 13 can, it does offer you options to figure out a path forward.

Facing Foreclosure? Contact a Chapter 13 Bankruptcy Attorney Today

Have you been threatened with foreclosure? You may have no idea where to turn or what to do. Our Chapter 13 bankruptcy attorneys can offer you options. You don’t have to lose your house. Chapter 13 bankruptcy can offer you a way to stop foreclosure, catch up on past due mortgage payments, and keep your home long-term.

Call the foreclosure lawyers at Clark & Washington today at (865) 689-1777 to discuss your specific situation. We will help you determine if Chapter 13 bankruptcy is right for you.