People from all walks of life can end up with financial struggles; no one is immune to financial crises and overwhelming debt. The events that unfold after falling behind on payments vary by case, but one common element that is involved in many cases is a mortgage payment. For many families, mortgages are one of the highest monthly payments they have, which makes it one of the first to fall behind on. I’ve asked James and Jean if I could share their story, to show you that financial trouble can occur at any time in your life – but this chapter in your life doesn’t need to end poorly.
James and Jean owned their home for 20 years and had never been late on a payment; however, due to health problems, James had to retire early. Unfortunately, Jean, who hadn’t worked for many years because James’ salary was enough to support them, was unable to find a job that paid enough to support them and cover their payments. After being behind on their credit card bills for a few months, they also started to fall behind on James’ medical bills and their mortgage payment. They worked with the mortgage company to try to refinance their home, to no avail. The mortgage company proceeded to file a foreclosure action.
James and Jean were facing losing the home they had worked so hard for when they came to us.
Stopping Foreclosure with a Chapter 13 Bankruptcy
Bankruptcy stops foreclosure actions as soon as you file your bankruptcy case. The automatic stay provisions of the Bankruptcy Code goes into effect upon the filing of a bankruptcy case and remains in effect until the case is closed or the court modifies the stay. The automatic stay prohibits creditors from taking any actions to collect debts including but not limited to filing a foreclosure action, continuing with a foreclosure case or selling a home at a foreclosure sale. Therefore, simply filing a bankruptcy case prevents your mortgage lender from filing or continuing with a foreclosure action.
In order to save your home, you’ll also need a way to pay back your past due mortgage payments. A Chapter 13 bankruptcy case allows you to do just that. Once James and Jean received relief from their unsecured debts (i.e. credit cards, medical bills, etc.), they were able to resume making full and timely mortgage payments. As for catching up on overdue payments, their Chapter 13 repayment plan helped them do that.
Through your Chapter 13 bankruptcy plan, you can spread out past due mortgage payments over a 36- or 60-month plan, with no interest. This way, you’ll repay the past due mortgage payments, late fees, interest and other fees through the Chapter 13 plan with no interest while you resume paying your regular mortgage payments outside of the bankruptcy plan. At the end of your bankruptcy case, your mortgage will be completely current and you can continue making your mortgage payments without fear of losing your home.
When James and Jean completed their bankruptcy plan, their mortgage was completely current and the remainder of their unsecured debt was discharged. This allowed them to have a fresh start, free of most of their debts, and capable of continuing to rebuild their finances without foreclosure and bankruptcy clouding their future.
Foreclosure and Bankruptcy
Most people never dream they will face foreclosure and bankruptcy; however, there are times when it may be beyond your control. Life is unpredictable and you never know when you may lose your job, find yourself facing a costly and painful divorce, experience the loss of a spouse or become too ill to work. Regardless of the reason for your financial distress, bankruptcy can help eliminate the debt that is causing you stress and give you the fresh start that you need to rebuild your finances and your life.
If you are in the process of having your home go into foreclosure or you think it may be in your immediate future, meeting with a bankruptcy attorney will give you the clarity you need to make an informed decision. To see how we can help you save your home by filing a Chapter 13 bankruptcy case, sign up for a free bankruptcy consultation.
