People who have been battling a bank that is trying to foreclose on their home may have tried everything they can think of short of filing for Chapter 13 bankruptcy. They have applied numerous times for loan modifications and have always been turned down. They have agreed to repayment arrangements that they knew they could not manage for long because the monthly amount is too high. Finally, consulting Bankruptcy Attorneys is the only option left.
It is possible to have Bankruptcy attorneys make an emergency filing without completing all the requirements first. This normally isn’t done, but when a home is scheduled for auction by the bank, an attorney helps them block that action with a Chapter 13 filing. A successful Chapter 13 arrangement pools outstanding unsecured debt and certain overdue payments together into one affordable monthly payment to be made each month for up to five years.
An Automatic Stay
The back payments on the mortgage can be included. This essentially forces the bank into a loan modification of sorts, as bankruptcy puts an automatic stay that halts action by most creditors, including the mortgage holder. The bank can file a motion to lift the stay, but that process generally takes months. In addition, the bank representatives may prefer to see whether the bankruptcy program will work out for this individual instead of fighting the petition.
The Main Consideration
The main consideration with Chapter 13 is that the person filing must be able to afford the monthly payment to the bankruptcy trustee while also keeping up with all currently due payments. Defaulting can cause cancellation of the bankruptcy protection and put the home back in foreclosure status. Unfortunately, defaulting in Chapter 13 is relatively common because it tends to make the person’s budget far too tight. Any unexpected income problem or expense can throw the entire plan off track.
After consulting with the bankruptcy attorney, the person should understand whether or not a payment arrangement like this is feasible. The prospective client will be asked to bring in a list of outstanding debts and back payments along with an income statement. The lawyer will know if Chapter 13 would be too difficult or even impossible with the income level.
In that case, Chapter 7 can be filed. This type of bankruptcy protection also has an automatic stay, and it clears away most outstanding debt. Preventing foreclosure is not a feature of this filing, but it can delay the process for a few months so the household residents have a little more time there.