Stop Foreclosure With A Chapter 13 Bankruptcy

Most people do not like to even think about bankruptcy. This is even true of people who simply owe more each month than they can possibly pay. For them, bankruptcy is like admitting defeat and they don't want to even consider it.

However, bankruptcy laws were actually created to help people get a new start. There are several types of bankruptcy, but normally only two types affect home owners: Chapter 7 and Chapter 13. These are the names of the respective chapters of the bankruptcy code.

Neither a Chapter 7 or a Chapter 13 bankruptcy allows a person to keep his home without paying his mortgage lender. The mortgage lender will either be paid or ultimately get the house which secures the home loan debt.

Chapter 7 is referred to as a liquidation plan and Chapter 13 is referred to as a court ordered payment plan. For this article, I will look at the Chapter 13 bankruptcy and how it may stop foreclosure.

With a Chapter 13 bankruptcy, a debtor proposes a payment plan to pay his or her creditors over time, normally several years. The debtor needs to have a steady income. Also, there is a requirement that the creditors receive more than they would if the debtor filed a Chapter 7 bankruptcy. Unsecured creditors, like credit card companies, may receive less than all of the money owed to the creditor. They may receive pennies on the dollar.

If the payment plan is approved by the bankruptcy court, the debtor pays a bankruptcy trustee each month and the trustee pays the creditors.

So, how does a Chapter 13 bankruptcy help stop foreclosure?

First, when a bankruptcy is filed, all civil actions, such as foreclosure, are stopped until the bankruptcy court says that they can proceed. This gives debtors (home owners) more time to gather the money needed to pay their mortgage lender.

Second, with a Chapter 13 bankruptcy, a debtor (home owner) may pay any lump sum "catch up" amount over a period of time. The debtors (home owners) have to pay their regular monthly mortgage payment. But the regular mortgage payment with a little bit of the "catch up" amount may be easier for a home owner to pay than trying to pay everything at one time.

It is easier to qualify for a Chapter 13 bankruptcy than for a Chapter 7 bankruptcy. If you think that you may qualify and that it may help you avoid foreclosure, contact a lawyer licensed in your state. Bankruptcy is very technical and it is best for you to have a lawyer handle it for you.

This article is general information. If you have any questions of any nature concerning bankruptcy and stopping foreclosure, talk with a lawyer licensed in your state.

Stop! Don't blindly chase any option to stop foreclosure. See stop foreclosure options to learn what options you have in your situation. Remember, what works in one person's situation, may or may not work in your situation to stop, avoid, and prevent foreclosure. For more general information, see Stop Foreclosure - Five Options You Need To Know.

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