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Will Filing Chapter 13 Bankruptcy Stop a Foreclosure?

It can be devastating to lose your home in a foreclosure. Fortunately, filing Chapter 13 bankruptcy is an excellent option that can save your home. Chapter 13 can give you the opportunity to reorganize your debt to make it more manageable. This debt includes payments you are making on your mortgage.

What is Chapter 13 Bankruptcy?

Chapter 13 is also known as a wage earner’s plan. You will be able to determine a plan to repay all or part of your debts. With the help of an experienced Jacksonville bankruptcy lawyer, you propose a plan to repay your creditors. The amount you are required to repay is based on several factors, including your income. The time period for this repayment plan is typically three to five years.

There are certain requirements you must meet to be approved for Chapter 13. They include:

  • Adequate and fair treatment of priority and secured creditors.
  • The plan was proposed in good faith.
  • All disposable income used to fund the plan.
  • Feasibility — the debtor still has enough money for living expenses.
  • Financial circumstances have not changed substantially since filing.
  • If applicable, all child support and alimony payments due since filing must be current.

When will Filing Chapter 13 Bankruptcy Stop Foreclosure?

A foreclosure is the act of a lender taking back a property after the owner has failed to keep up their mortgage payments. A foreclosure on a house usually follows these steps:

  1. You miss a mortgage payment within 30 days.
  2. You enter default if you don’t make your late payment within 30 days.
  3. The lender will likely send you a letter of breach or demand after 30-45 days.
  4. The lender files a notice of foreclosure about 90 days after your first missed payment.
  5. You will receive a letter of default around two to three months after the first missed payment.

Many people opt to file Chapter 13 bankruptcy specifically to avoid foreclosure. The mortgage foreclosure case will stop upon filing as you enter an automatic stay. An automatic stay temporarily halts all collection efforts, including foreclosure. This is regardless of the stage of your foreclosure.

Filing Chapter 13 bankruptcy can give you the protection and relief you need to get caught up on your debts—and keep your home. A plan will generally allow for you to get caught up on your past due mortgage payments, or arrearage. It will involve paying the arrearage off in addition to keeping up with your monthly mortgage payments. You must continue to make all mortgage payments on time while in Chapter 13. If you fail to do so, the bankruptcy courts can lift the automatic stay. In that case, foreclosure proceedings may resume.

When to Seek Legal Help in Foreclosure

It’s important to seek legal advice as soon as possible when facing a foreclosure. Filing Chapter 13 bankruptcy must be done swiftly and before any foreclosure sale takes place. The bankruptcy lawyers at Parker & DuFresne can help you structure a repayment plan to avoid foreclosure and get out of debt. Contact them to file bankruptcy in Jacksonville at (904) 733-7766.


Parker and DuFresne

Parker and DuFresne