Chapter 13 Bankruptcy Can Permanently Stop a Foreclosure

After filing a chapter 7 bankruptcy, foreclosure is delayed but still pending sale.  When speaking about a chapter 13 filing, however, the threat of foreclosure may be eliminated completely by allowing you to get caught up on your past-due payments over time.  This does not replace the responsibility of timeliness on current payments but creates a way for you to repay large sums of accumulated debt while avoiding foreclosure.  To maximize benefits, there are many strategies and best practices with regards to when to file.  Bankruptcy Utah can provide all the counsel needed so that you are informed and prepared for your filing.


Repairing the Damage of Temporary Financial Setbacks

Chapter 13 bankruptcy can be helpful when the cause of payment delinquency was a setback that has since been resolved.  As with Chapter 7 bankruptcy, a chapter 13 filing automatically stops the foreclosure – at least in the short-term. The difference with chapter 13 filing is that you can pay back your mortgage debt in installments over a period of three to five years.  Interest on the back-due amount may be owed, as well as certain fees charged by the servicer, and a commission to the bankruptcy trustee for the handling of your payments.

To provide an example, let’s say you are 4 months behind on $1000 monthly mortgage payments so your delinquent balance reaches $4000.  Let’s also say your servicer has charged $500 in fees. In a 3-year case under a Chapter 13 filing, you would simply take your current monthly payments of $1000, then add the total amount owed and applicable fees divided by 36 months (3 years) which comes to $125.  Then add upon that amount the interest and commission owed.  Thus, your monthly payment moving forward would be somewhere in the neighborhood of $1130 until the end of the term outlined in your bankruptcy filing.  Again, if your financial setbacks have been resolved, this could be a good way to reinstate the mortgage and pay back debt owed.  A bankruptcy attorney can help you with the specifics of your unique situation.

It is important to understand that delinquent payments in a chapter 13 bankruptcy can be cured as long as there has not been a foreclosure sale.  Consult a bankruptcy attorney at Bankruptcy Utah for information on the bankruptcy process and certain circumstances that may allow you to get rid of certain liens and mortgages on your property. 


Alternative Options

If setbacks are still an issue and future payments can’t be made, the curing of past delinquencies will likely not apply.  If this is the case, a bankruptcy attorney at Bankruptcy Utah will gladly assist in helping you use the bankruptcy process to sell your home.  This can help you retain the equity without losing the home to foreclosure.  If the sale price is sufficient to cover pending costs and debts, this may be a beneficial option.   For any and all questions, give us a call and we will be glad to assist.