At Wesbrooks Law, we understand how overwhelming it can be to face foreclosure.
Fortunately, federal law offers a solution to stop foreclosure through Chapter 13 bankruptcy.
This article explains how Chapter 13 can help you keep your home, even when foreclosure seems imminent.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, also known as a reorganization bankruptcy, allows individuals to create a repayment plan to manage their debts over time. Unlike Chapter 7, which may involve liquidating assets, Chapter 13 will enable you to retain your home and other assets while restructuring your debts.
Key Features of Chapter 13:
- Keep Your Home: Chapter 13 helps you avoid foreclosure and gives you time to catch up on past-due mortgage payments.
- Repayment Plan: You can develop a five-year payment plan that allows you to pay off arrears without incurring additional interest.
- Federal Protection: Once you file, an automatic stay immediately stops foreclosure proceedings.
- Zero Interest on Past-Due Payments: This helps keep your repayment plan more affordable.
- Flexible Exit Options: If your financial situation improves, you can refinance or exit Chapter 13 early.
The Automatic Stay: Your Shield Against Foreclosure
One of the most potent tools that Chapter 13 provides is automatic stay. Once your bankruptcy case is filed, this legal mechanism prevents creditors from continuing or initiating foreclosure proceedings. Even if a foreclosure sale is scheduled to happen minutes after you file, that sale becomes void. The automatic stay allows you to work out a plan to pay off your mortgage arrears.
How It Works:
- Filing the Case: Once you file for Chapter 13, your creditors, including mortgage lenders, must halt all collection activities.
- Immediate Protection: Even if foreclosure proceedings have begun, the automatic stay protects you from losing your home.
- Legal Consequences for Creditors: Any foreclosure activity after your Chapter 13 filing is considered void.
Creating a 5-Year Repayment Plan
One of the benefits of Chapter 13 is the ability to structure your missed mortgage payments, or arrears, into a 5-year repayment plan. This means you don’t have to come up with all the past-due payments upfront. Instead, you pay them off over time—interest-free.
Benefits of a Chapter 13 Plan:
- Affordability: Your arrears are packaged into a manageable repayment plan based on your budget.
- Zero Interest: You don’t have to worry about accruing more interest on your missed payments.
- Stay Current on Your Mortgage: You must resume your regular mortgage payments after filing, but this plan helps you catch up on the past-due amounts without overwhelming your finances.
Can You Exit Chapter 13 Early?
Chapter 13 bankruptcy offers flexibility. While the repayment plan typically lasts 3 to 5 years, you’re not locked in for the entire duration if your financial situation improves. Here are some options for exiting early:
- Refinance: If you can refinance your mortgage during the Chapter 13 process, you can pay off the bankruptcy plan early and exit.
- Sell Your Home: You may also sell your home to pay off your debts and conclude your Chapter 13 plan.
The key is that you’re in control, and Chapter 13 provides multiple ways to regain financial stability.
Why Chapter 13 Is a Guaranteed Way to Stop Foreclosure
Chapter 13 is a guaranteed solution to halt foreclosure proceedings. Once you file, federal law requires that all creditors stop their collection activities, including foreclosure. This gives you time and space to create a financial plan that works for you while protecting your home.
Summary:
- Immediate Protection: The automatic stay stops foreclosure as soon as you file.
- Manageable Payment Plan: A 5-year, zero-interest repayment plan helps you catch up on past-due mortgage payments.
- Flexibility: You can exit Chapter 13 early by refinancing or selling your home.
Contact Wesbrooks Law Today
You don’t have to go through foreclosure alone if you’re facing foreclosure. At Wesbrooks Law, we’ve helped countless homeowners stop foreclosure and restructure their debt through Chapter 13 bankruptcy.
Contact us today for a free consultation and take the first step toward securing your home and financial future. Call us at (602) 262-4357 or visit our office to discuss your options.
About Mark Wesbrooks:
Mark Wesbrooks, founder of Wesbrooks Law, has over 29 years of experience in bankruptcy law and has represented over 5,000 clients in Arizona. He is also the author of the top-selling book on Amazon.com, “The Debt Relief Playbook—How to Defeat Creditors and Win the Collection War.” In addition to debt relief, Mark has extensive trial experience in personal injury and wrongful death litigation, securing one of the top ten verdicts in an Arizona personal injury case in 2016.