Chapter 13 Bankruptcy allows homeowners that have fallen behind on their mortgage payments with the need to stop foreclosure to reorganize their finances by eliminating or reducing unsecured debt, as well as, the preservation of both real estate holdings and vehicles.
1. As soon as an attorney files Chapter 13 bankruptcy on the borrower's behalf, an "automatic stay" goes into effect.
2. This stay will stop all foreclosure proceedings on the borrowers home by the lender.
3. While in Chapter 13 bankruptcy to stop foreclosure, the lender cannot contact you in regard to your pre-filing mortgage arrears (the amount you are behind on the mortgage).
4. In most foreclosure cases, you can have up to 60 months (or five years) to cure the delinquency in your mortgage payments. This is set up through the bankruptcy 'plan'.
Disadvantages of a Bankruptcy:
o It is critical to make scheduled bankruptcy plan payments and keep the 'current' mortgage payments up to date. If a mortgage payment is missed after the Chapter 13 is filed, the lender can ask the bankruptcy court to lift the protection of the bankruptcy code. The Lender can also attempt to set aside the automatic stay and pursue foreclosure if you are not in compliance with the terms of your Chapter 13 bankruptcy repayment plan.
o If your bankruptcy plan is dismissed, the lender will immediately start where they left off in foreclosing against your home.
o The attorney must file the bankruptcy petition in time to stop the foreclosure. Borrowers should not wait until the last minute to investigate this option. The borrower must work closely with the attorney to prepare a bankruptcy plan, which must then be filed and communicated (with file number) to the lender, previous to the foreclosure.
o The homeowner can ONLY file a Chapter 13 only if they are employed or have a steady source of income. For the court to approve the Chapter 13 bankruptcy, the homeowner must have enough income to make the Chapter 13 bankruptcy plan payments, as well as all current mortgage payments that come due after you file for Chapter 13 bankruptcy.
Advantages of a Bankruptcy 13:
o Chapter 13 plan payments are fixed so that the homeowner can meet all the living expenses first and then pay any additional income to creditors. An experienced consumer bankruptcy attorney can help the homeowner create a repayment plan that works for borrower and the lender.
o Chapter 13 bankruptcy can be an affordable solution to stop foreclosure for many homeowners. The cost of Chapter 13 bankruptcy may even be less than the costs to refinance or take out a second mortgage, which usually involves significant points, fees and closing costs, as well as a higher interest rate on the new loan.
Bankruptcy Example:
David is a real estate investor that owned 10 duplexes. David managed the properties on the weekends and worked full time during the weekdays. One day, on his way to work, David rear ended by a truck and was injured badly, and did not receive a paycheck for 2 months. In the meantime, 3 of his tenants moved out and he suffered a huge loss of rental income. David recuperated but with a $120,000 hospital bill, over $67,000 in credit card bills and with mortgages about to foreclose, David decided to fill for Bankruptcy 13. The Bankruptcy 13 stopped "stayed" the foreclosure process. David's hospital and credit card bills were wiped away and the outstanding mortgage payments were put into a plan to pay off within 5 years. Although the bankruptcy will be on David's credit report for 7 years, he no longer has the credit card and hospital debt to pay.
David is a real estate investor that owned 10 duplexes. David managed the properties on the weekends and worked full time during the weekdays. One day, on his way to work, David rear ended by a truck and was injured badly, and did not receive a paycheck for 2 months. In the meantime, 3 of his tenants moved out and he suffered a huge loss of rental income. David recuperated but with a $120,000 hospital bill, over $67,000 in credit card bills and with mortgages about to foreclose, David decided to fill for Bankruptcy 13. The Bankruptcy 13 stopped "stayed" the foreclosure process. David's hospital and credit card bills were wiped away and the outstanding mortgage payments were put into a plan to pay off within 5 years. Although the bankruptcy will be on David's credit report for 7 years, he no longer has the credit card and hospital debt to pay.
K. Patrice Williams has a BA in Economics as well as a law degree. She has successfully managed both residential and commercial multi-million dollar income producing assets and budgets for more than 10 years. As a 1st year law student, Patrice established a real estate development and consulting business and acquired over 30 rental properties. As the housing market values decreased- like millions of other Americans-her properties were negatively impacted by shifting ARM's, combined by a sluggish economy. Patrice has researched and personally implemented almost all of the pre-foreclosure techniques detailed in the book: "6 Simple Steps to Avoid Foreclosure".http://www.avoidforeclosuremanual.com |
