Bankruptcy Chapter 13 Can It Stop Foreclosure?

I have been laid off from work and have joined another organization that pays me less than what I earned earlier

. I have a family to support. My wife is on unemployment income. I am finding it really difficult to pay a monthly $980 on my mortgage. Who can help me decide whether or not I should file bankruptcy? Will bankruptcy stop foreclosure? How should I go about it?

-Jake Moore

You need to decide between foreclosure and bankruptcy when you have no other option to repay your dues. It is not easy to file bankruptcy given the amendments in the law. If you have thought of filing bankruptcy, you will first need to attend a counseling session within 6 months before you file. After this it will be decided which Chapter you may file. If you want to file Chapter 13 you will have to pass the Mean Test that will confirm your eligibility.

Filing chapter 13 shows that you are at least making an attempt to pay off the debt rather than getting it discharged and avoiding responsibility. If you do qualify, you will be required to prepare a repayment plan based on your daily expenses and other financial obligations. This plan needs to go to the court appointed trustee who will in turn review the plan and send it to your lender.

Remember, you lender might challenge the plan at the hearing. If your plan gets approval, foreclosure will be stopped (if that was initiated by the lender) and cannot be initiated unless you are discharged. In most cases, as soon as you file Chapter 13, an automatic stay is entered. This temporarily stops foreclosure and any other collection action. You can now make a plan for repayment.

You may seek advice regarding this from an attorney or simply visit a mortgage community and share your query. There are several such communities that offer help either for a fee or free of any charge.

When can you file bankruptcy?

You can file bankruptcy under these following circumstances:

You are employed or have a regular source of income.

You have enough income in order to make a Chapter 13 payment plan and make current mortgage payments while also paying for living expenses.

You do not have any debts exceeding the statutory cap on your Chapter 13 bankruptcy.

How does Chapter 13 work?

Once you have filed bankruptcy, you must file a proposed payment plan within 15 days. This plan must also have your income and the permitted living expenses. Your current payments must be kept as current once you file Chapter 13. You must make sure that you make all payments. If you default on any, the bankruptcy court will then remove the automatic stay and hence allow the mortgage company to resume with the foreclosing process.

by: Samantha Taylor

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