3 Ways Chapter 13 Bankruptcy Can Help Save Your Home
Posted on: 16 March 2020
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If you're struggling to make your mortgage payments, it's time to explore options to help you save your home. Chapter 13 bankruptcy is one alternative that can help you remain in your home.
A Chapter 13 bankruptcy is actually a form of debt consolidation; at the end of your bankruptcy period, the remaining balances for some non-secured debts (like credit card debt) are dismissed. Read on to learn more about how Chapter 13 bankruptcy can save your home.
1. Chapter 13 Bankruptcy Halts the Foreclosure Process
As soon as you file for Chapter 13 bankruptcy, the foreclosure process is paused. This is known as an automatic stay. An automatic stay applies whether you're a payment or two behind and the bank is threatening foreclosure or if the bank has already begun foreclosure proceedings. Bankruptcy will halt the foreclosure process even if your home is scheduled to be sold.
Even if you haven't filled out all the paperwork for your bankruptcy, your lawyer can file an emergency bankruptcy petition. This will give you a little more time to complete the paperwork and gather the necessary documents to proceed with the bankruptcy.
2. Your Bankruptcy Payment Will Allow You to Catch Up on Past Due Payments
One of the benefits of Chapter 13 bankruptcy is it allows you to get caught up on any past-due mortgage payments. To determine your Chapter 13 payment, the court will examine your non-exempt assets, your income, household size, and debts.
A Chapter 13 plan lasts anywhere from three to five years. Spreading out your overdue payments over such a long duration makes it easier for you to catch up on past due payments.
3. Chapter 13 Bankruptcy Makes Your Debt Load More Affordable
It's important to note that Chapter 13 bankruptcy won't decrease the amount of your monthly mortgage payment; this payment will remain the same, and when your bankruptcy plan is complete, you'll need to continue paying the mortgage as agreed. However, the plan takes into account your total debt load when determining your plan payment. Even if your mortgage payment doesn't increase, your other debt payments might go down.
For example, assume that you have a $1,000 mortgage payment, a $600 credit card payment, and a $200 car payment, for a total monthly debt payment of $1,800. Your plan may only require you to repay a small amount of your credit card debt. This could lower your credit card payment to $100, saving you hundreds of dollars each month.