Chapter 13 Bankruptcy to Avoid Foreclosures

For a homeowner, facing the prospect of foreclosure can be a terrifying thing. No one wants to lose their home through any means, least of all through inability to make mortgage payments. Luckily for those in need, there are options available which can help delay or avoid sending a home into foreclosure proceedings. One option is filing for Chapter 13 bankruptcy after consulting with a Dallas bankruptcy attorney.

What is Foreclosure?

When a borrower (in this case the homeowner) fails to make regular mortgage payments, the lender has the right to take steps to recoup their losses on the loan. Typically this involves selling the home at auction, a process known as foreclosure. Of course this means that the homeowner will be evicted from their house, a prospect that most homeowners wish to avoid at all costs. But if a homeowner is simply unable to make payments on the mortgage, there are other options to consider.

How Does Chapter 13 Protect Against Foreclosures?

Filing for Chapter 13 bankruptcy results in an order for relief being issued by the court. The order for relief includes an “automatic stay,” which forces creditors to halt all collection proceedings at once. This includes the process of foreclosure on a home. Now, there are ways the lender or bank can try to push a foreclosure through, but typically filing will give the homeowner 3 to 4 months breathing room, no small thing for someone swamped by debt.

How Else Will Chapter 13 Help?

In addition, Chapter 13 bankruptcy allows the filer to schedule a repayment plan for the arrearage (accumulated debt through nonpayment) over a period of up to five years. The homeowner will still have to make all future monthly mortgage payments during that time, however. It is not a lottery ticket, but bankruptcy may be the right solution for avoiding some foreclosures. Consult a bankruptcy attorney to see if filing is the right option for you.