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Using Chapter 13 Bankruptcy as a Remedy for Mortgage Foreclosure

chapter 13 and mortgage foreclosure

If you are in danger of losing your home to foreclosure, filing for Chapter 13 bankruptcy may be a smart, strategic move. It puts an automatic stay in place to prevent creditors from trying to collect owed payments. This stay also temporarily pauses the foreclosure process or prevents it from being initiated. As long as a foreclosure sale has not already been finalized, your mortgage lender cannot move forward.

Chapter 13 provides a chance to restructure your overdue mortgage payments over an extended period of time. A repayment schedule is established that calls for paying the arrearages due to all mortgage creditors within a span of three to five years. The automatic stay is not lifted until the repayment plan is completed, at which time all of the pre-bankruptcy filing arrearages will have been paid.  Since you are required to make all regular payments, as they come due during the repayment period, your mortgage loan will be in good standing when the case is completed.

Chapter 13 may be beneficial if you owe more on your first mortgage than your home’s current value. In this situation, the second mortgage lien can be “stripped” and treated as an unsecured creditor which often times means only paying a small fraction of the debt.

Once you file for bankruptcy, you can also pursue a loan modification with your mortgage lender. The bank may agree to reduce your interest rate or to let you make owed payments over a longer period of time than could be achieved in a Chapter 13 plan.

Chapter 13 bankruptcy isn’t an option for everyone. Whether it is for you depends on your resources and debts. Eligibility for this relief requires that you have sufficient, regular income to fulfill your debt obligations without the need to liquidate your assets. If you owe more than you can realistically pay back, you may have to file for Chapter 7, which could prevent you from keeping your home.

The dedicated Georgia bankruptcy attorneys at Jeff Field & Associates help people in and around Dekalb County and Fulton County to find debt relief solutions and avoid foreclosure. To learn more about our services related to Chapter 13 bankruptcy, call 404-381-1278 or contact us online to schedule your free initial consultation. Our main office is located in Scottdale, and we have satellite branches in Marietta, Athens, Lawrenceville, Douglasville and Gainesville.

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