Jeffrey M. Rosenblum, P.C.
A Fresh Start

How Chapter 13 may help you keep the house

You're behind on your mortgage payments and you're facing foreclosure. You also have a lot of other debt from credit cards, personal loans and some medical bills.

You have started considering bankruptcy, but you do not like how Chapter 7 bankruptcy forces you to liquidate your assets. You want to hold onto as much as possible, and you especially want to keep your house.

One solution may be using Chapter 13 bankruptcy. When you first file, an automatic stay is applied to your foreclosure case. This does not end that case, but it essentially puts it on hold until the bankruptcy ruling has been made. This could take a number of months, buying you some time.

With Chapter 13, your debt gets consolidated into a repayment plan instead of liquidating assets and eliminating the debt. You then have three to five years to pay off everything that got included in that plan. It is all combined into a monthly payment, which is then distributed as needed to your creditors.

Part of that payment could be the delinquent balance on your mortgage. Perhaps you pay $2,000 per month and you're six months behind. You owe $12,000 total. As long as you make those monthly payments and stay current on the rest of your mortgage payments, you can save your home from foreclosure.

This type of bankruptcy is often used by those who earn a living wage but still have debt. Perhaps you were out of work for those six months, for example. You now have a job again, and you're just looking for a way to eliminate the outstanding debt from the time that you were unemployed.

If you do decide to use Chapter 13 bankruptcy, make sure you know all of the official steps you need to take.

Source: Bankrate, "Keep house with Chapter 13 bankruptcy," Justin Harelik, accessed March 06, 2018

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