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How a Chapter 13 Can Help with Foreclosure

Keeping Your Home when Filing for Bankruptcy

In contrast to Chapter 7, Chapter 13 bankruptcy typically allows you to keep all of your assets and property. This is because, rather than simply eliminating all debt, Chapter 13 requires you to pay back your debt over a designated period of time, either three or five years. Filing for Chapter 13 does not affect your mortgage—but you must continue to make your mortgage payments in order to keep your home. Depending on your specific situation, you will either continue making current payments to your mortgage lender or you will make mortgage payments to a bankruptcy trustee as part of your repayment plan.

What to Do If You Have Already Received a Foreclosure Notice

Receiving a notice of foreclosure can be incredibly stressful. However, it is important that you remember that the bank cannot immediately sell your home. It will need to go through a series of steps to complete the foreclosure process. Arkansas allows for both judicial and non-judicial foreclosure. In either case, the property must first be appraised. In most instances, the entire foreclosure process can take up to 120 days, though it is possible for the foreclosure process to only take a few weeks.

Filing for Chapter 13 puts what is known as an automatic stay on the foreclosure. In other words, once you have filed for bankruptcy, the foreclosure process automatically stops. The automatic stay also stops your mortgage lender (and other creditors) from continuing any collection actions without a court order. Remember, this does not mean you do not have to pay your current mortgage payments. To save your home from foreclosure, you must continue making these payments.

Once you have filed for Chapter 13 bankruptcy, you will be required to follow a debt repayment plan. Typically, if you are behind on mortgage payments, you will be able to pay back mortgage arrears as part of this repayment plan.

Paying Back Mortgage Arrears

If you are behind on mortgage payments, you may pay arrears as part of your Chapter 13 repayment plan. This is in contrast to Chapter 7 bankruptcy, which does not allow you to pay mortgage arrears. In order to alleviate mortgage default, you will need to make sure that you pay all mortgage arrears by the time your Chapter 13 repayment plan concludes. These payments are typically made in monthly installments that are paid to the bankruptcy trustee who then forwards your payments to your mortgage lender. During this time, you will also need to continue making all of your current mortgage payments.

If you have received a notice of foreclosure, it is important that you act quickly. Filing for Chapter 13 bankruptcy might be your best option for stopping foreclosure and keeping your home. Contact the Batesville Chapter 13 attorney at Burgess Law Firm for a free consultation.

Our firm can be reached online or by phone at (870) 293-6004.