Chapter 13 and Foreclosure

No one plans to default on a mortgage, and the stress of falling behind and facing foreclosure can make the situation that much worse. With the recent credit crisis and the value of homes throughout the country on the decline in many areas, some Los Angeles County residents may find that foreclosure is an unwelcome reality. As house payments increase, while home values plummet, it can be difficult to negotiate fair loan terms that allow individuals to remain in their homes. People who have taken out a second, or even a third mortgage may find that their income no longer allows them to remain current on all of their financial obligations. In situations like these, Chapter 13 bankruptcy may be able to help you remain in your home, even if you are several months behind on your mortgage payment.

Chapter 13 bankruptcy can put a stop to foreclosure proceedings for the duration of your case - the automatic stay will stop the foreclosure process, giving you valuable time to work with your lender to reach an agreement. Even if you cannot reach an agreement with your mortgage lender, there are still options available. The bankruptcy judge has the ability to "cram down" some types of loans. You may find that your car payments can be adjusted to reflect the current value of your car, rather than what you owe, for instance. This can free up income for your house payment, allowing you to get current on your mortgage. Any loan modifications made under the bankruptcy are permanent, and you would enjoy these favorable terms even after your repayment plan is completed.

Another way that Chapter 13 bankruptcy can help you if your house is in foreclosure is by spreading out your past due mortgage payments over the life of your repayment plan. For example, if your monthly mortgage is $1200 and you are behind by three months, you would normally have to pay a lump sum of $3600 for your arrears, plus the $1200 you owe for the current month in order to catch up on your mortgage payments. If you are in a Chapter 13 repayment plan, your arrears will be spread out over the 3-5 years of the plan. This means that instead of a $3600 lump sum payment, you would instead pay an additional $100 per month during a 3 year repayment plan. By making these small monthly payments, along with your regular mortgage payment, you can make up the amount owed gradually, and remain in your home.

If you have a second or third mortgage on your home, Chapter 13 bankruptcy may be able to help you as well. If you do not have enough principal in your home to pay off these loans, they can be reduced, or removed completely. The removal of a second or third mortgage obligation can greatly reduce your expenses, and allow you to get back on your feet financially much sooner than you would otherwise.

Because Chapter 13 bankruptcy offers so many options for restructuring debt, as long as you have adequate income, you will most likely be able to keep your home. If you are concerned about your Los Angeles County Chapter 13 bankruptcy case and whether or not your home will be subject to foreclosure, contact our office. We have skilled, professional Los Angeles County bankruptcy attorneys available to help you understand the laws, and how they pertain to your particular case. We offer a free initial case evaluation, so that you can get the answers you need when it comes to Chapter 13 bankruptcy and foreclosure. Contact us today, and get started on the path to financial freedom.