Chapter 13 Bankruptcy and Foreclosure


The foreclosure rate in the United States has reached a pandemic level. There have been millions of foreclosures over the past few years. The number of these foreclosures has shattered annual records. So high is the number of foreclosures that levels such as this have not been seen since the Great Depression. This certainly leads many to wonder what can be done to forestall an eventual foreclosure if not outright stop it. There are certainly no easy answers or solutions to such a problem. However, it is possible that foreclosure actions may be stopped if you were to file for Chapter 13 Bankruptcy.

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What is Chapter 13 Bankruptcy and how does it work as a means of stopping foreclosure?

Chapter 13 bankruptcy is usually the second option for those that wish to file for bankruptcy. Usually, when they are unable to file for Chapter 7 bankruptcy, they will look towards Chapter 13 as the second option. The purpose of Chapter 13 bankruptcy is to reorganize debts and their repayment structure. In particular, the person in debt has the option of being able to make debt repayments over a period of three to five years. However, such a chapter of bankruptcy cannot be ordered by the courts unless the person filing has a steady source of income. Such an income must be present during the entire duration of the designated repayment period.

The reason for this is obvious. If you do not have a steady source of income then you will be unable to make your payments which would turn the whole bankruptcy proceedings into little more than an exercise in futility.

The way Chapter 13 bankruptcy relates to foreclosure is that it is likely the court will order an immediate stay on foreclosure actions at the filing. Actually, the court could order a stay on all collections of secured debt including your car or other such things you may be in arrears on.

This DOES NOT mean your debt to the mortgage holder will be discharged. You will only receive a short stay in which to set up the court ordered payment restructuring plan. The immediate stay will allow for a buffer zone period where the debtor will no longer be in a situation where the stress of meeting massive monthly obligations has to be met. For those whose expenses far exceed what they are earning per month, this additional stay of obligations could prove enormously helpful on many levels.

There will come a time shortly after the stay of foreclosure has been issued where the debtor will have to make new payments. However, the courts and the attorneys will aid in setting up an agreeable payment restructuring plan that may help set the stage for being able to handle all future monthly foreclosure payments.

Ultimately, there is no easy way out of a situation involving foreclosure. However, when you have sought protection under the laws of Chapter 13 Bankruptcy, you can make the process a lot easier than it would be otherwise.


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