Chapter 13 & Foreclosure
Once you have fallen behind to your bank on monthly mortgage payments, it is usually only a matter of time before you will receive a foreclosure lawsuit. This is generally because your bank is looking for the full re-instatement amount which you are unable to pay. A Chapter 13 filing will result in the immediate issuance of an "automatic stay" that will automatically, without notice to your bank, protect you from any attempt by your bank, and any other creditor, to collect the money you owe them. You will be allowed, by law, to propose a repayment plan in order to catch-up on the mortgage arrears. The automatic stay will give you the "breathing room" necessary to reorganize all of your debt.
In a Chapter 13 plan, monthly payments are made to a Court appointed Trustee who is basically your disbursing agent. Plan payments are sent your Trustee who, in turn, will pass that payment along to your creditors.
The filing of a Chapter 13 will also make you current on your mortgage. In a foreclosure action, the bank seeks to accelerate the entire loan amount so that you owe not only arrears but the entire principal balance along with all costs and fees associated with the foreclosure. When a Chapter 13 is filed, the mortgage is de-accelerated resulting in your responsibility to resume current mortgage payments with the one due after the filing.
In most cases you may propose a plan that uses the maximum five years to repay the arrears as well as any other debt owed at the time of filing (e.g. anything from back taxes to credit card debt or medical bills). In some instances it may be possible to pay to pay less than full amounts owed on unsecured debt in full satisfaction of the obligation. Only a careful detailed analysis of your financial situation can determine whether and to what extent a Chapter 13 can benefit you.
Contact our office to schedule a complimentary consultation with our lawyer to discuss your financial situation and learn if Chapter 13 is right for you.
