No homeowner wants to have to declare bankruptcy because they assume it means that both they and their family will be destitute and homeless as a result. In fact filing for Chapter 13 is basically a form of debt consolidation which allows you to spread your total debt repayments out over a number of years, instead of trying to deal with them all at once. The fallout from the property crisis of 2008 has seen a growing number of people looking for financial relief by filing for Chapter 13. Especially when they get a notice of foreclosure from their lender, which can then result in a foreclosure sale, or what is also known as a sheriff\’s sale.
Most property owners will have attempted at this point to renegotiate with their lenders for more favorable repayment terms, but for unknown reason most lenders seem to be more interested in keeping their customers in debt, which can ultimately lead to foreclosure than consent to a loan modification. This is despite the fact that major US lenders have vast amounts of property inventory that they have no hope of selling in the very near future, unless of course they\’re willing to do so at a loss.
So if you\’ve received a foreclosure notice from your lender or financial institution right now would be a perfect time to consult with a bankruptcy attorney so you can take the next steps towards protecting your home via a Chapter 13 filing.
Features Of A Chapter 13 Bankruptcy
Automatic Stay
When you\’re filing for this type of bankruptcy a court normally issues an automatic stay which protects you from all your creditors, thus preventing any foreclosure or sheriff\’s sale of your home. This means that you can immediately stop worrying about losing your home and instead focus on the repayment of your debt. If your creditors do contact you for any reason simply give them your case number and the contact details for your bankruptcy attorney.
Spread Your Debt
Instead of liquidating all your assets and selling them to pay off your debt, as you do with Chapter 7, instead Chapter 13 bankruptcy allows you to pay off your debt over a timeframe of usually 60 months in total. This allows you to maintain a semblance of a normal lifestyle while still repaying your other debts, such as medical bills and credit card debt.
Multiple Mortgages
Using Chapter 13 financial reorganization can allow you to \”strip\” off a second mortgage if the property is completely insolvent (or what is referred to as underwater). This usually only happens when the value of your first mortgage is more than the current value of your primary home. This means that you have no financial resources to pay a second mortgage and it\’s seen as an unsecured debt. This means it\’s included in your repayment plan as part of your Chapter 13 filing, effectively meaning you can wipe out the debt of a second mortgage in 60 months or so.