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How Chapter 13 bankruptcy can help you stay in your house

On Behalf of | Jul 22, 2019 | Uncategorized

Far too many people conflate bankruptcy with poverty. It is possible for individuals with successful careers and high income to wind up over their heads and struggling to make ends meet. You can be a homeowner with a stable source of income and still find yourself precariously close to foreclosure because of your debt.

The good news for people struggling to stay afloat financially is that bankruptcy protections can often make all the difference when they fall behind on mortgage payments. Chapter 13 bankruptcy allows you unique opportunities to protect your equity in your home and take control of the debt that is causing your current issues.

Filing for bankruptcy can stop early foreclosure proceedings

When you file for bankruptcy, the courts grant an automatic stay on collection activity until they can review your application. In other words, creditors, including your mortgage lender, cannot take further steps at collecting debt until you finalize bankruptcy or end the process. Filing bankruptcy is one of the only ways to temporarily halt foreclosure proceedings without repaying what you owe as soon as possible.

Chapter 13 bankruptcy may allow you to negotiate new terms

Bankruptcy typically involves a meeting of creditors. In Chapter 7 bankruptcy, the primary point of the meeting is to determine whether creditors object to your filing. In Chapter 13 bankruptcy, the borrower and the creditors can renegotiate the terms of the debt.

For example, you may be able to reduce your monthly payment or make an arrangement where your lender adds the outstanding mortgage payments to the end of your mortgage instead of requiring their payments immediately.

Even that little bit of financial leeway can make a massive difference if you find yourself financially overextended. While you still need to repay your mortgage and reaffirm the debt as part of your bankruptcy process, the more favorable terms may make it easier for you to continue paying.

Lower debt obligations free up more money for bills

Once the courts have negotiated acceptable terms for your repayment plan as part of Chapter 13 bankruptcy, you will need to make payments for a predetermined amount of time. Instead of multiple payments to different creditors, you will make one payment directly to the courts that they will then divide among your creditors.

Having a lower overall monthly debt load makes it easier to focus on your most important bills, such as your mortgage and utility costs. Too many people believe negative misinformation about bankruptcy, which may be keeping them trapped in a difficult financial situation.

If you have trouble paying your bills each month and worry that you could lose your home as a result, filing for Chapter 13 bankruptcy can be a way to obtain some debt relief without endangering the equity you have already accrued in your home.


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