Saving your home through a Chapter 13 Bankruptcy
One major reason consumers file for a Chapter 13 Bankruptcy is to save their home from a foreclosure. When a person falls behind in their mortgage payments, eventually the bank sends a foreclosure notice to the home owner (usually after three or four missed payments), warning them that the foreclosure process will begin. The process and time frame varies by State, but generally a lender or bank must give the homeowner substantial notice before they obtain a judgment for foreclosure. This guide focuses on New York Bankruptcy Law, you should contact an attorney in your area for information about your specific case.
Rest assured, that if you just received a foreclosure notice that does not mean that the bank will immediately sell your house. However, it is extremely important to review your notice carefully in order to find out how much time you have before your home is sold and contact an attorney who is familiar with Chapter 13 Bankruptcies as soon as you receive a foreclosure notice. A Chapter 13 Bankruptcy can protect your home from a foreclosure sale.
One benefit of a Chapter 13 bankruptcy is that it will prohibit the lender from conducting the foreclosure sale. This is because when a Chapter 13 bankruptcy is filed, an automatic stay prohibits the mortgage lender, along with other creditors, from continuing any collection efforts without further court permission. In other words, if you file for a Chapter 13 bankruptcy, you will save your house as long as it has not been already sold in a foreclosure sale. This is why it is so important to review a foreclosure notice carefully and contact a bankruptcy attorney immediately to discuss how to save your home from a foreclosure sale. Time is important!
Another benefit Chapter 13 bankruptcy can provide you is that once you file for bankruptcy, your attorney will create an affordable payment plan based on your income, which will give you the opportunity to cure your mortgage default and catch up on your payments. While you are protected by the automatic stay, you can save your home from a foreclosure sale by catching up on your missed mortgage payments through your Chapter 13 repayment plan. A Chapter 13 repayment plan can last from three to five years and can provide you an affordable way to cure your default over a period of time. During the repayment period, you will make monthly payments to the trustee that will help cure the amounts owed to your mortgage lender (missed payments on your mortgage) while you continue to make your regular monthly mortgage payments. You cannot do this in a Chapter 7 bankruptcy and this is a major reason why some people prefer a Chapter 13 bankruptcy over a Chapter 7. This process will give you time to pay back the missed payments and still keep your house safe from foreclosure. Once you have completed the Chapter 13 repayment plan, you will be considered current in your mortgage payments because you will have paid back the payments you missed. You can then begin making your regular mortgage payments after you complete your repayment plan (usually after three to five years).
The payments you make in a Chapter 13 repayment plan on based on your income and your attorney will help calculate how much you can afford to pay each month in order to catch up on your missed mortgage payments. This is usually a low monthly payment. Once you complete all payments under the plan you will no longer be in default and will save your home.
If you would like to learn more about Bankruptcy and you live in NYC contact my office at 212-244-2882.