As soon as you file for chapter 13 or chapter 7 bankruptcies, the court will issue an Order of Relief. Within this order is a provision that directs all bill collectors to cease and desist, so they are legally required to leave you alone while the case progresses. This also forestalls the foreclosure process for at least three months, until the bankruptcy proceedings are concluded.
Chapter 13 and arrearage
Through arrearage, you can propose a repayment plan that will allow you to pay off your delinquent mortgage payments. However, you must be able to stay current on your monthly mortgage payments.
Essentially, you are proposing that you will make two mortgage payments over a proposed period of time, like 3 years. After that, once your delinquent debt has been paid off, you will return to normalcy with the bank and be expected to fulfill your loan agreement as originally promised.
Under Chapter 13 Bankruptcy, you can sometimes have your 2nd and 3rd mortgages negated.
If you are in an upside down mortgage, and your first mortgage is secured by the value of the home, there won’t be any equity to support or secure the second and third mortgages. They then become unsecured mortgages and, under Chapter 13 law, you may qualify to have your second and third mortgages annulled.
Bankruptcy should not be taken lightly
If you are determined to hold onto your house and prepared for the substantial blow your credit will take after bankruptcy, bankruptcy is a final, best way to save your home. Play this card only in extraordinary circumstances!