How a Chapter 13 Bankruptcy Stops Foreclosure
Nov 27, 2019
Maybe you lost your job or you or a family member were battling an illness. Whatever it may be, you fell behind on your mortgage. The bank is demanding a large lump sum payment to bring your mortgage current or they will foreclose on your home. You feel like you have exhausted all your options and cannot imagine losing your home. A Chapter 13 Bankruptcy can stop the foreclosure, even when the bank is not willing to work with you. Here is how a Chapter 13 Bankruptcy stops foreclosure.
The automatic stay is an order from the federal court that prevents your creditors from collecting against you. When you file a Chapter 13 Bankruptcy, the automatic stay stops the foreclosure process in its tracks, even if a Sheriff Sale has already taken place. You have the protection of the automatic stay during the entire 3 to 5 year repayment plan as long as you are able to continue making your regular mortgage payments.
CHAPTER 13 PLAN
A Chapter 13 Plan is the repayment schedule of your debts over a 3 to 5 year period. The plan outlines how your disposable income will be used to get current on your secured debts as well as dealing with your unsecured debts. Depending on your income, assets and debts, it may be possible to wipe out all your unsecured debts without payment or at a much lower percentage.
MAKE ALL FUTURE MORTGAGE PAYMENTS
In order to maintain the protection of the automatic stay for the length of your Chapter 13 Bankruptcy, all future mortgage payments must be made after the Chapter 13 bankruptcy is filed. The Chapter 13 Plan includes all missed mortgage payments prior the Chapter 13 Bankruptcy being filed. To ensure the protection of the automatic stay continues for the length of your Chapter 13 Bankruptcy, you need to stay current on your post-petition mortgage payments. If you fall behind on your post-petition mortgage payments, the mortgage company can file a Motion for Relief from the Automatic Stay wherein they request to be able to continue with the foreclosure. You and your attorney can object to their motion and, once again save your home from foreclosure, if you are able to come to an agreement with the mortgage company on how the post-petition mortgage arrearage will be repaid.
A Chapter 13 Bankruptcy is a great option to save your house from foreclosure, but it may not be right for everyone. You need to make sure you can afford the Chapter 13 Plan payment and your mortgage payment going forward. We recommend you meet with an experienced bankruptcy attorney. Pedersen Law Office, LLC offers free consults in all our areas of practice and will meet with you personally to discuss your specific circumstances and see what options are available for you. Our law office serves the communities of Appleton, Neenah, Menasha, Oshkosh, Green Bay and their surrounding areas.