When facing financial hardship, large payments, like your monthly mortgage payment, can become harder and harder to make. This happens often when homeowners are faced with foreclosure. It’s common to face foreclosure after a major change in your family’s financial circumstances or other life-changing events, such as losing a job, unexpected medical problems, losing a spouse, or divorce.
Are you falling behind on mortgage payments and facing foreclosure on your home? Don’t worry. Below, we will go over how foreclosures work and how filing for Chapter 13 bankruptcy can stop foreclosure.
How do foreclosures work?
When a borrower stops making payments on their home, the loan becomes delinquent and the homeowner goes into default. When the borrower goes into default, the lender typically gets in touch with the borrower to see what is going on and determine if they will be able to pay the balance of the loan. If the lender determines the borrower cannot pay, the lender may file a Notice of Foreclosure, which begins the foreclosure process.
At this point, there is still time to stop foreclosure on your family’s home by filing for Chapter 13 bankruptcy.
What is Chapter 13 bankruptcy?
With Chapter 13 bankruptcy, your property is not at risk to be sold by the court as it would be when you file for Chapter 7 bankruptcy. Chapter 13 is a type of bankruptcy designed for individuals with regular income who would like to pay all or part of their debts in installments. Debtors are only eligible for Chapter 13 if their debts do not exceed the specific monetary amounts outlined in the Bankruptcy Code.
When you file for Chapter 13 bankruptcy, you will develop a plan to repay what you can afford to your creditors over a period of time, which is usually 3 to 5 years. You will also most likely be able to pay creditors less than what you currently owe.
One of the biggest benefits of filing for bankruptcy is that an automatic stay goes into effect the moment a debtor files, which pauses all collection efforts, including home foreclosure.
How to stop foreclosure on your home
Filing for Chapter 13 bankruptcy is the best way to quickly stop the foreclosure sale and save your home. As mentioned above, after you file for Chapter 13 bankruptcy, an automatic stay will delay any foreclosure activity and give you time to recover and make a payment plan.
Chapter 13 bankruptcy lets you pay off your late unpaid payments (arrearage) over the length of the Chapter 13 repayment plan you propose. However, you will need enough income to meet your current mortgage payment in addition to paying off the arrearage. If you make all the required payments throughout the repayment period, you will be successful in saving your home from foreclosure.
Because of all the rules and regulations involved in bankruptcy and foreclosure cases, it’s important to consult an attorney about your specific financial situation.
Consult Tolar & Tolar Attorneys at Law when facing foreclosure
At Tolar & Tolar Attorneys at Law, we specialize in helping families get back on track when facing financial hardship and overwhelming debt. We believe you shouldn’t have to go at it alone, and we dedicate ourselves to making sure you get a fair shake during the bankruptcy process and keep as much of your life together as possible. We aim to give you a new and brighter economic outlook. Contact us today for a free consultation!