If you are behind on your house payments and the bank won’t work with you – there is hope. It is possible to stop mortgage foreclosure in Chapter 13 Bankruptcy. The key is to act quickly.
What is foreclosure?
When you purchased your home, you signed a promissory note in which you promised to repay the debt. If you get behind on these payments, the mortgage lender will usually sue you in state court. This lawsuit is a foreclosure, and the process is designed to take possession away from you. The foreclosure process can take many months, but will eventually end with a sheriff sale. If your house has been sold at a sheriff sale, then it is too late to save in a Chapter 13 Bankruptcy.
Stop Mortgage Foreclosure in Chapter 13 Bankruptcy
When a bankruptcy is filed, the automatic stay goes into effect. The automatic stay will prevent the foreclosure lawsuit from moving forward. Usually the lawsuit is dismissed and any potential sheriff sale is cancelled. This is the first step to taking back control.
Pay Back Past Due Mortgage Payments
Now that you are under Chapter 13 Bankruptcy protection, you are required to pay back the past due mortgage payments over a three to five year period of time. You are also required to continue to pay the ongoing mortgage payment. In the bankruptcy universe, the past due payments are called arrears, and the ongoing payment are called the conduit. To successfully complete a Chapter 13 Bankruptcy you must pay both the arrears and the conduit.
The Further Behind You Are, The Larger The Payment
You only get three to five years to pay back the mortgage arrears. These arrears are added to the ongoing mortgage payment. So for example: Lets say you are behind $10,000. Your ongoing mortgage payment is $1000 per month. You want to be done with bankruptcy in 48 – 54 months. Divide the $10,000 arrears by 50 months and get you somewhere around $200/month. So you are looking at a monthly payment of at least $1,200 per month ($1,000 + $200 arrears). There are other fees as well. For instance, the Chapter 13 Trustee charges a fee to manage the payments on your behalf. The point is – the further behind you are, the more your monthly payment will be.
You Need To Move Fast
The key to success is to move quickly. If you have applied for a loan modification and got denied, you need to think about Chapter 13 Bankruptcy. This is especially true if a foreclosure action is filed in state court. Time is not on your side.
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