If you plan to file for bankruptcy and you own your own home, then a Chapter 13 proceeding might be the best route to take. Unlike other types of bankruptcy, Chapter 13 can help you keep your home rather than lose it to a foreclosure sale even if you haven't made all your mortgage payments recently.
However, this process isn't automatic or straightforward. Read on to learn more.
Chapter 13 Can Stay Foreclosure Action
Once you file for Chapter 13, your home is generally protected against foreclosure. You get a stay that prevents lenders from foreclosing on the property.
This stay is automatic at this stage. It will then extend into your bankruptcy period if you qualify.
Some people move fast here. They file for bankruptcy before their lenders get to the foreclosure stage. However, sometimes, it is the threat or even the start of the foreclosure process that makes people file for Chapter 13.
A stay can help you even if your lender has already started foreclosure proceedings. Lenders usually have to stop these proceedings once you file for Chapter 13.
Chapter 13 Stays Don't Work After a Sale
While a Chapter 13 stay keeps your home safe even if your lender has initiated foreclosure, there are times when it won't shut down this process. A lender might not have to stop foreclosure proceedings if they have advanced to the sale stage.
For example, if your lender completes the foreclosure sale before you file for Chapter 13, then you can't stop or reverse the process. You'll usually lose your home. It makes sense, therefore, to file as soon as you can to get full protection from the stay.
Chapter 13 Doesn't Remove Payment Obligations
Chapter 13 bankruptcy helps you get your finances under control. However, you still have to commit to some obligations during the term of your bankruptcy.
For example, you have to be able to afford future mortgage payments. You have to make every payment. Plus, you have to find a way to pay down all your arrears during your bankruptcy period.
If you don't meet these commitments, then your lender might be allowed to foreclose on your home. So, it is important to factor these costs into your budget when you plan your bankruptcy filing.
To get the best results, consult an experienced Chapter 13 bankruptcy attorney. They can give you accurate advice and help you save your home if that is possible.
For more information, contact a local law office like the Law Offices of Dan Moulton.