One of the most effective ways to stop a foreclosure is by filing a Chapter 13 bankruptcy. Chapter 13 bankruptcy allows a debtor to restructure his debts and pay them over a three to five year period.
Who Can File Chapter 13 Bankruptcy?
In order to file Chapter 13 bankruptcy, a debtor must have sufficient income to fund a Chapter 13 plan. The amount which must be paid into the Chapter 13 plan is calculated by deducting a debtor’s monthly expenses from his net monthly income. The difference is referred to as the net disposable income. The Bankruptcy Code requires that 100% of a debtor’s net disposable income be paid into the Chapter 13 plan.
How Does Filing a Chapter 13 Bankruptcy Stop a Foreclosure?
When a debtor files a Chapter 13 bankruptcy, the automatic stay goes into effect. The automatic stay prevents a debtor’s creditors from pursuing collection efforts against the debtor and the debtor’s property. This means that a lender is prohibited from initiating or continuing foreclosure efforts against a homeowner who has filed bankruptcy.
A Chapter 13 bankruptcy allows a debtor to repay a mortgage delinquency over time. Each month, a portion of the funds paid into the Chapter 13 plan will be disbursed to a debtor’s lender to be applied to the mortgage arrearage until it has been paid in full.
A Chapter 13 debtor must begin paying his regular monthly mortgage payments beginning the first month after he files bankruptcy. These payments must be made directly to the lender.
What Happens If a Debtor Gets Behind on His Chapter 13 Plan Payments?
If a debtor gets behind on his Chapter 13 Plan payments, he should notify his bankruptcy attorney immediately so that an amended plan can be filed or other arrangements can be made with the Chapter 13 trustee. If a debtor does not bring his plan payments current, eventually, his case will be dismissed and his lender will be able to foreclose.
What Happens If A Debtor Gets Behind on His Mortgage Payments During the Bankruptcy?
If a debtor gets behind on his post-petition mortgage payments, he should notify his bankruptcy attorney immediately. In most instances, the attorney will be able to negotiate an agreement with the lender for the debtor to bring his post-petition mortgage payments current over a six to nine month period. If a debtor fails to bring his post-petition mortgage payments current, the lender will file a Motion for Relief from Stay to obtain the court’s permission to foreclose.
Getting Legal Help with Foreclosure Defense
Formulating a feasible Chapter 13 plan is at the heart of every Chapter 13 case. Most debtors simply don’t know enough to do this. Therefore, it’s critical to hire a qualified foreclosure defense attorney who will represent you through all phases of the bankruptcy case, or help you find options other than bankruptcy to save your home from foreclosure.
