Foreclosure is one of the scariest experiences a homeowner can encounter. The thought of losing your home because you fall behind on payments is devastating. Unfortunately, when you purchase a house, you can never be 100% certain what the future holds. The loss of a job or the surprise of medical bills can trigger a financial emergency and within just a few months, you are faced with threats from your mortgage lender. Luckily, it is possible to protect your home and get back on solid financial ground.
If you are about to fall behind on mortgage payments, but have not yet, contact your lender. Some banks are willing to work out a new payment plan with you making monthly payments more affordable. Unfortunately, most homeowners do not realize just how bad their financial situation is and the time in which they have to alter their mortgage payments lapses. In some cases, refinancing to a lower interest rate (and therefore a lower monthly payment) is an option, but this typically requires some equity in the home and cannot be done if payments are more than a few months behind.
The option available to homeowners behind on their mortgage by several months and struggling to make ends meet in general is Chapter 13 bankruptcy. This process can stop foreclosure efforts, but you must act quickly.
Threat of foreclosure is the reason many homeowners consider bankruptcy in the first place. Chapter 13 triggers something called an automatic stay. This temporarily halts foreclosure and all other collection actions. Additional action must be taken, but the automatic stay allows you to make decisions about your financial future without creditors constantly breathing down your neck.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a reorganization of your debts. You are still required to make payments to creditors for a period of three to five years, but the payments are manageable. In order for Chapter 13 to be an option, you must have a steady income. This type of bankruptcy also allows you to keep your home, car, or other assets that may be at risk in a Chapter 7 bankruptcy. Also, at the conclusion of your plan, you can receive a discharge on your unsecured debts, just like in a Chapter 7 bankruptcy. This type of bankruptcy will help you catch up on your missed payments for your home and discharge your unsecured debt for potentially pennies on the dollar.
Once the bankruptcy arrangement is in place, you must make all of the agreed upon payments on time. Failure to do so can result in a lift of the automatic stay and foreclosure efforts can begin again. The good news is that if you make all your plan payments, you will be current with your mortgage, free of your unsecured debts and ready for a fresh start.
Is Chapter 13 Bankruptcy Right for Me?
There are certain criteria that must be met in order to qualify for Chapter 13 bankruptcy. If you are receiving foreclosure threats from the bank or you are struggling in other ways with your finances, you need to speak to an expert. Contact the law office of Frank J. LaPerch, PC at 845.942.5500 to schedule a consultation or to find out if you qualify to save your home under Chapter 13 bankruptcy.