If you have a mortgage and you have been struggling to meet your obligations, then you may be well on the road to a foreclosure and the loss of everything you have worked for. There is a way out, a petition for relief through a Chapter 13 bankruptcy. If successful, your financial situation could turn around completely, enabling you to keep your home.
Filing for bankruptcy will automatically halt collection actions by all creditors. This includes any foreclosure actions. This is a temporary halt only and should your bankruptcy petition be rejected, those actions will recommence immediately. If your petition is filed correctly, then you shouldn’t have an problems with rejection and is one of the major reasons why you should engage a bankruptcy attorney.
Once your petition for bankruptcy has been accepted, the balances owing are frozen for the duration of the petition. When it comes to mortgages, it is like drawing a line at that point. Under a Chapter 13 petition, you will enter into a repayment plan. This plan takes into account the repayments required to meet your mortgage obligation. The current arrears on your mortgage are paid off over the period of the bankruptcy petition – this is generally between three and five years.
At the end of the repayment period, your mortgage should be up-to-date with all the arrears paid. This will cancel any need for foreclosure action at that point. At the same time, all of your unsecured debts such as credit card debt is wiped clean. This means you will have more disposable income to meet your mortgage obligations. A short word of advice – keep those mortgage payments up to date.
After being discharged from bankruptcy, your credit score will be shot to pieces. Making regular mortgage payments will, over time, go someway to restoring that credit score. Losing your credit worthiness is a hefty price to pay, but it is no more than if your lender had foreclosed on your home – this way, you get to save your home.
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