Chapter 13 bankruptcies allow homeowners to stall foreclosure procedures to pay off any back debts on their mortgages, which makes this type of bankruptcy a viable option for individuals who want to save their homes. In some instances, filing for a chapter 13 bankruptcy can prove to be helpful for homeowners who have fallen behind in mortgage payments and need time to catch up. In this blog, our Rancho Cucamonga bankruptcy attorney explains what happens how a chapter 13 bankruptcy impacts foreclosure proceedings and mortgage obligations.
Saving Your Home
If you’ve fallen so far behind your mortgage payments that you cannot catch up to current mortgage obligations, chapter 13 bankruptcy is a good solution to saving your home. Under this type of bankruptcy, you can include your mortgage in your repayment plan, and spend the duration of your plan paying any late and unpaid mortgage payments. In order for this to work, however, you’ll need to ensure that you adhere the income requirements laid out to meet your current mortgage payments along with any other fundamental expenses.
Eliminating Subsequent Mortgages
Because your initial mortgage is secured and included in the entire value of your home, your second or third mortgage may not have enough equity. This may lead the banks to count these mortgages as an unsecured debt. In a chapter 13 bankruptcy, unsecured debts are considered a last priority and sometimes do not have to be paid back.
Once you begin filing for chapter 13 bankruptcy, any and all foreclosure proceedings must be paused until your repayment plan is approved. Should you include a plan of action that outlines how you will pay back late and unpaid mortgages, the lender is bound by the plan once it’s approved and cannot continue with foreclosure proceedings.