In this article, you can discover…
- How automatic stay can help prevent foreclosure.
- Whether a new mortgage can be negotiated through Chapter 13 bankruptcy.
- Common pitfalls to avoid when filing for Chapter 13 bankruptcy.
What Is Automatic Stay, And How Does It Prevent Foreclosure?
Immediately upon filing the bankruptcy petition, an automatic stay is put in place, meaning that no creditor can take any action related to you without going through the bankruptcy process. This has an extremely helpful and immediate impact on foreclosure proceedings as well, stopping the process in its tracks.
There are a great many people who need to stop foreclosure immediately, but they can not get current on mortgage payments, and the entire balance may now be due. Filing Chapter 13 bankruptcy puts that automatic stay in place and stops the foreclosure, allowing you to restart mortgage payments at a rate you can manage.
What Is The Process For Including Mortgage Arrears In A Chapter 13 Plan?
If you are $5,000 behind on payments to a mortgage company, that $5,000 is what we refer to as an arrearage. As you make plan payments for that amount to the Chapter 13 trustee, the trustee, in turn, pays the mortgage company.
However, our Chapter 13 trustee is not a pass-through trustee in the Eastern District of Texas. In other words, all payments due after filing the bankruptcy petition are made directly to the mortgage company, not our trustee.
Can You Negotiate New Mortgage Terms Through Chapter 13 Bankruptcy?
Yes, you can. You can still seek a modification of your mortgage while you’re in Chapter 13. While obtaining that modification comes with some challenges, it’s not an uncommon practice, and a seasoned bankruptcy attorney can help you navigate that process and negotiate new terms.
What Are The Potential Pitfalls To Avoid When Using Chapter 13 To Stop Foreclosure?
Chapter 13 bankruptcy is meant to help you get current on payments and keep your home, not delay foreclosure. Using Chapter 13 to delay foreclosure puts the cart before the horse. Ideally, you should be filing for Chapter 13 bankruptcy if you are behind on mortgage payments and are already facing foreclosure. Now, you can put those arrearages in the Chapter 13 plan and repay them over time.
What Are The Long-Term Effects Of A Chapter 13 Bankruptcy On Homeownership?
If you’ve been clear of a bankruptcy discharge for two and a half years and have maintained creditworthiness, you may fully qualify for a federally guaranteed mortgage.
On the other hand, failing to comply with the Chapter 13 repayment plan can cause your case to be dismissed. At that point, you will no longer have the protection of automatic stay in place, and the mortgage company can restart the foreclosure process.
It is very important to maintain your payments under the repayment plan; if you don’t, you could wind up right back where you started and face foreclosure all over again.
For more information on How Chapter 13 Bankruptcy Can Help Stop Foreclosure, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (888) 402-5557 today.
