Chapter 13: Stop Foreclosure
Chapter 13 Bankruptcy Was Designed to Stop Foreclosure
Are you one of the hundreds of thousands of Americans facing foreclosure?Did you know that a new house enters foreclosure every 13 seconds in this country? (according to the Center for Responsible Lending)Foreclosures are on the rise and, unfortunately, they have been for some time now.
The rise in foreclosures is due to a number of reasons, which include:
- banks giving out “bad” loansWall Street practicing risky trading behaviormass layoffs and the high unemployment rate
- the high cost of living
No matter what the reason, the threat of foreclosure can weigh heavily on a person and a family.But there are ways to stop foreclosure. One way is by filing Chapter 13 bankruptcy.
Chapter 13 & the Automatic Stay
When a debtor files a bankruptcy petition with the court, he or she is usually immediately given the protection of the automatic stay.This stay is a court order that legally stops creditors from contacting you and pursuing any further collection efforts, which may include:
- foreclosurerepossessionutility shutoffssome lawsuits
- some wage garnishments and more
As you can imagine, this automatic stay often provides needed and welcomed relief to the bankruptcy filer.
The Chapter 13 Repayment Plan
The next step is for the debtor, the bankruptcy court and the debtor’s creditors to agree on a repayment schedule. This repayment plan typically lasts between three and five years and includes the debtor making one lower monthly payment directly to the bankruptcy court.In exchange, the court usually allows the filer to keep his or her property—as long as payments are made on time.At the end of the repayment plan, if all payments were made on time, the court has the option to discharge the rest of the filer’s remaining unsecured debts (like credit card bills, medical bills and utility bills).
Chapter 13 Bankruptcy Eligibility
Unlike Chapter 7 bankruptcy, there is no official test a person must take in order to qualify for Chapter 13.However, because Chapter 13 involves a repayment plan, the filer should have a regular income.This is important, because if the filer misses a planned payment, foreclosure and repossession efforts may be resumed.If you’re being threatened with foreclosure of your home or repossession of your property, it may be time to talk with a local bankruptcy lawyer about your debt-relief options.
A bankruptcy lawyer can help you decide whether filing bankruptcy could help you get back on track and protect your hard-earned property.