Chapter 13 bankruptcy can stop foreclosure and allow you to catch up on mortgage arrears over 3-5 years. Learn how Chapter 13 works, the automatic stay, and whether it's the right strategy for you.
Chapter 13 is a "reorganization" bankruptcy for individuals with regular income. Unlike Chapter 7 (which liquidates assets), Chapter 13 allows you to keep your property — including your home — while catching up on past-due payments through a court-approved 3-5 year repayment plan. For homeowners facing foreclosure, Chapter 13's most powerful feature is the automatic stay, which immediately halts all collection actions — including the foreclosure sale.
The automatic stay is an injunction that takes effect the moment your bankruptcy petition is filed. It legally prohibits the lender from continuing foreclosure proceedings. If a foreclosure sale occurs after filing, it is void. The stay remains in effect unless the lender files a successful Motion for Relief from Stay.
Automatic stay takes effect immediately. The foreclosure stops. You continue making your regular ongoing mortgage payments.
Your plan spreads the mortgage arrears over 3-5 years. You make one monthly payment to the Chapter 13 trustee, who distributes to creditors including your mortgage servicer.
Once the court approves (confirms) your plan, you make payments for 3-5 years. At the end, your arrears are cured and the foreclosure is resolved.
After completing all plan payments, remaining dischargeable debt is eliminated. Your mortgage is current and you keep your home.
Get a free consultation to determine if Chapter 13 is the right strategy for your situation.
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