If you are behind on your mortgage payments, your mortgage company will take legal action to foreclose on your home. Many homeowners are willing to take whatever measures necessary to keep their homes, even for an indefinite time. On the other hand, homeowners are also increasingly defaulting on their mortgages out of anger, fear or despair rather than making a purely sensible decision about their best financial interests. Chapter 13 bankruptcy is often the only way to fend off a foreclosure in the event that you fall behind on your mortgage payments.
CHAPTER 13
Chapter 13 bankruptcy will allow you to pay off unpaid payments and late fees over the length of a repayment plan that we propose, typically three to five years. To complete the Plan, you will need at least enough income to meet current mortgage payments plus some portion of the arrearage.
If you are already behind on your mortgage payments and your lender has filed a Notice of Default against your property, you may have very limited time to act. Should your lender prove to be uncooperative, then filing a Chapter 13 bankruptcy may be the only option available to you.
Chapter 13 will allows you to reorganize and pay off your debts over as long as 60 months. Or it can buy you time to have your agent find a buyer for the home and make a sale. Or you can buy some time to modify your mortgage, or negotiate a better repayment schedule, or arrange a short sale.
As long as you file your Chapter 13 case before the actual foreclosure auction is held, your home will be protected by the Automatic Stay.
THE “AUTOMATIC STAY”
Filing a Chapter 13 bankruptcy triggers a powerful legal mechanism known as the Automatic Stay. Your creditors are ordered by the bankruptcy court to immediately cease all collection efforts, including foreclosure. If your home is scheduled for a foreclosure sale, the sale will be legally postponed while your bankruptcy is pending.
Your mortgage company, however, will take steps to obtain the court’s permission to proceed with the foreclosure by filing a Motion to Lift the Automatic Stay. Landlords and mortgage companies in the Washington, D.C. area are savvy, and filing bankruptcy in D.C. to delay foreclosure can be wrought with hazards and potential pitfalls. To obtain the maximum benefit from Chapter 13, you should consult a bankruptcy attorney experienced with handling Motions to Lift the Automatic Stay.
NOTICE OF FORECLOSURE
When your receive a Notice of Foreclosure Sale, time is of the essence and you must act quickly. If you intend to vacate your residence and file a Chapter 7, then you will need to find another place to live and arrange to move. If you intend to stay in your home, however, you must immediately contact a bankruptcy lawyer in D.C. and prepare to file a Chapter 13 to delay the foreclosure sale.
Typically, foreclosure begins about three to four months after you fall behind on your mortgage payment. During this time, you should attempt an alternative measure to bankruptcy, such as loan forbearance, short sale, or deed in lieu of foreclosure. If these measures fail, however, and you receive a Notice of Foreclosure, then consider filing a Chapter 13 as a way to avoid or forestall foreclosure.
ELIMINATE UNSECURED SECOND MORTGAGES OR HOME EQUITY LOANS
Chapter 13 may also help you eliminate the payments on your second or third mortgage. If your home has dropped in value, then you may no longer have any equity with which to secure these loans. A second mortgage or HELOC (home equity lines of credit) that is wholly unsecured above market value can be “stripped off” and frequently does not have to be paid back at all.
YOUR OPTIONS
If you are overburdened with unsecured debts like credit cards, medical bills, and other types of loans, then Chapter 7 might be the right option for you. As a bankruptcy lawyer in D.C., I can assure you that if you are current on your mortgage payments, and your home in D.C. is your primary residence, then you will not lose your home in a Chapter 7 bankruptcy. If you have missed a few mortgage payments, however, you should consider filing for bankruptcy in D.C. under Chapter 13.
A Chapter 13 bankruptcy will allow you to get current on your mortgage over three to five years, eliminate loans above market value, and you will often be able to delay the foreclosure process in Washington, D.C. and Virginia by several months.
ABOUT THE AUTHOR
Brian V. Lee is a bankruptcy lawyer in Washington, D.C. and Virginia.
Lee Legal is a debt relief agency as defined by Section 528(a)(4) of the Bankruptcy Code. Lee Legal assists people in filing bankruptcy in Washington, D.C. and Virginia under the Bankruptcy Code.
Call (202) 448-5136 to learn more or to schedule a free consultation.
can i use chapter 13 to stay in the house as long as i can? i’m not making mortgage payments and am going to loose the house anyuway. how long will i get if i file chapter 13?
Fred:
Below are some of your options, however their applicability to you depends upon your specific circumstances. I am a bankruptcy and foreclosure lawyer in Virginia and Washington, D.C. You should consult with an experienced attorney in your jurisdiction to determine your options. No bankruptcy lawyer (or Debt Relief Agency) can advise you to take on additional debt.
If a Chapter 13 plan is feasible, however, you could gain as many as 5-12 weeks in your home by filing a Chapter 13.
If your home is going into foreclosure and you qualify for a Chapter 7 bankruptcy, then I would suggest simply filing a Chapter 7 rather than a Chapter 13, and indicating surrender in your Chapter 7 Statement of Intention.
Still another alternative is to begin a Chapter 13 plan then convert to a Chapter 7, or vice versa.
I have previous articles on both the Statement of Intention and Chapter 13 to Chapter 7 conversion, just search my blog.
Brian V. Lee, Esq.
http://www.lee-legal.com
Hello Mr. Lee: Can I file Chapter 13 eventhough I don’t qualify then change to file Chapter 7 in order to delay the foreclosure?
It depends upon what disqualifies you for a Chapter 13. The court may dismiss a Chapter 13 case for abuse of process if there is no colorable argument for Chapter 13 at the time of the filing.