Avoid Foreclosure through Bankruptcy
Financially challenging times as these have been hard on everyone, but these have been harder on people facing foreclosure. Foreclosure, normally, occurs when payments get 3 to 4 months late unless you can work out another plan with your lender to bring your loan current by way of loan modification etc.
Lenders, however, may show reluctance in accepting any application of loan modification or repayment plan with creditor or forbearance, if past payment records are not speaking highly of you. Unexpected problems like illness, loss of employment, marital issues or overspending are the most commonly found causes behind Foreclosure. While no amount of planning could have prevented these events except the one where you could have persuaded yourself to not spend ostensibly, that lead to foreclosure from happening, but with a little bit of planning, foreclosure, sure, can be prevented.
Chapter 13 Bankruptcy remains viable and generally the most sought after option to avert this housing crisis. It helps you keep your house that you would have lost in foreclosure.
Chapter 13 Bankruptcy can Stop foreclosure
Chapter 13 is most widely employed method by people, who are trying to save their homes from Foreclosure. This Chapter allows debtor with regular income to repay some or all of their debts with zero or minimal interest over a period of three to five years. Only secured and a few other kinds of debts are to be paid in full whereas other debts like unsecured loans, credit cards, personal loans are likely to be crammed down.
After filling for Chapter 13, the debtor submits a repayment plan to the Court, which the Court may accept as it is or introduce changes. Once the plan is approved by the Court, a trustee is appointed by the Court to whom the installments are to be paid by the debtor, who is turn would use it to pay the remaining money (arrears) to the creditors.
As soon as bankruptcy is filed, Court issues an Order of relief which stops creditor from pursuing any collection efforts against the debtor (like wage garnishment, discontinuance of utilities), which is popularly known as ‘Automatic Stay’. It almost invariably prevents eviction and halts foreclosure which buys debtor some time and allows him to catch up on his missed payments.
Debtors having steady income, who can show that they can pay the installments of restructured plan regularly can qualify for this relief. In addition to it, debtors must not have a liability of more than $1,010,650 in secured debts and of $336,900 in unsecured debts in order to qualify.
Bankruptcy being a federal proceeding is filed in U.S Bankruptcy Court while State Courts of debtor’s area of residence have jurisdiction over foreclosure proceedings.
Except in few cases, if a debtor pays all necessary payments in the plan, he/she is given full plan discharge. On the other hand, deficiency judgment will be held against the debtor, in case foreclosure of the home does not result in full recovery of the unpaid debt.
For more information about stopping foreclosure or Chapter 13 Bankruptcy, please call today and consult with one of out bankruptcy lawyers.