Chapter 13 and Keeping Your Home

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Can I Keep My Home and File Chapter 13

When your debts become overwhelming, filing Chapter 13 bankruptcy can be a great way to relieve some of that debt burden and develop a plan to repay what you can afford over time. However, many people avoid filing bankruptcy because they are worried about losing their property, most importantly their home. When you file Chapter 13 bankruptcy, the court confirms a plan for you to use your disposable income to pay back some or all of the debts you owe over a period of three to five years, which can give you time to cure your mortgage default and protect your home from foreclosure. If you are considering filing Chapter 13 bankruptcy, you are probably wondering whether you would be able to do so and keep your home. At Wright Law Offices, we specialize in consumer and business bankruptcy, and we can help you determine whether you can file Chapter 13 bankruptcy so you can reorganize your finances and repay your debts, while keeping your home.

How Does Chapter 13 Bankruptcy Work?

Chapter 13 bankruptcy gets its name from the chapter it falls under in the U.S. Bankruptcy Code, the code of laws that governs all bankruptcy proceedings in the United States. Also known as a wage earner’s plan, Chapter 13 bankruptcy is one way for debtors with regular income to repay as much of their debt as they can afford under a court-approved repayment plan, rather than struggling to keep up with minimum monthly payments to individual creditors. Unlike Chapter 7 bankruptcy, in which a debtor’s assets are liquidated and the proceeds are used to repay creditors, Chapter 13 allows debtors to reorganize their finances and pay back their debts, usually within three to five years.

The Automatic Stay and Foreclosure Proceedings

Just like any bankruptcy case, you are protected by the automatic stay when you file Chapter 13 bankruptcy, which means your creditors are prohibited from taking actions against you or your property to collect the debts you owe. This includes mortgage lenders. For debtors facing foreclosure, the automatic stay can put a stop to the foreclosure process and give the debtor time to save their home. Under a Chapter 13 repayment plan, debtors who want to keep their home have an opportunity to remedy their mortgage default and catch up on missed payments once the automatic stay is in place.

Catching Up on Missed Mortgage Payments

Chapter 13 bankruptcy is one of the two most common types of bankruptcy filed by individuals and families in the U.S., alongside Chapter 7 bankruptcy. Chapter 13 bankruptcy may be the right move for debtors who don’t qualify for Chapter 7 bankruptcy and have assets they want to protect, such as a home or vehicle. Rather than selling the debtor’s property to pay back creditors, the trustee in a Chapter 13 bankruptcy case will collect regular monthly payments from the debtor and use the payments to pay creditors over time, usually at an amount that is less than what is owed. When it comes to missed mortgage payments, however, these debts must be paid in full if you want to keep the property.

Creating a Chapter 13 Repayment Plan

Your Chapter 13 bankruptcy cannot proceed until the bankruptcy court confirms your repayment plan, which will only happen if the judge determines that you are capable of making the payments under the plan you have submitted. During the life of your repayment plan, you will make regular monthly payments to a bankruptcy trustee, who is responsible for distributing the payments to your creditors. If you have defaulted on your mortgage loan and the court approves a Chapter 13 repayment plan lasting five years, you will have five years to catch up on missed mortgage payments while also making regular monthly payments to your mortgage lender. Once you have completed the Chapter 13 repayment plan and cured your mortgage arrears, you will no longer be in default on your mortgage loan, and you can keep your home.

For debtors with regular income, Chapter 13 bankruptcy can be an affordable way to take care of overwhelming debts over time while protecting valuable assets, such as a family home. However, there are strict requirements debtors must meet in order to qualify for Chapter 13 bankruptcy, which is one of the reasons we recommend hiring an attorney. If you have received a foreclosure notice from the bank, you may still be able to save your home by filing a Chapter 13 bankruptcy, so long as you can create an acceptable repayment plan and keep up with payments under the plan. Our Chapter 13 bankruptcy attorneys at Wright Law Offices have a clear understanding of the Chapter 13 bankruptcy process and know how best to proceed when a debtor’s home and other valuable property is on the line. When you hire our firm, our attorneys will put their legal expertise to work for you in your Chapter 13 bankruptcy case.

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