Chapter 13 bankruptcy is a great tool for avoiding foreclosure. If you can stick to your Chapter 13 repayment plan, you may be able to:
Each of these Chapter 13 benefits are described in detail below.
In many ways, your Chapter 13 bankruptcy repayment plan is like a plan you might negotiate with the mortgage servicer. Either way, you have an opportunity to get your mortgage current over time. Of course, if the only reason you are filing Chapter 13 is to get time to get your mortgage current, and you could get a similar deal from the servicer, you’ll be better off not filing for bankruptcy, at least as far as your credit score is concerned.
EXAMPLE: Freddie owes $3,600 in missed mortgage payments. He receives a notice of default that gives him a month to pay up or lose his house. His mortgage servicer refuses to work with him because of a previous notice of default—the lender doesn’t think he’s a good credit risk.
Freddie had fallen behind on his mortgage because he was laid off, but now he’s working again. If he files for Chapter 13 bankruptcy and gives up one of the cars he’s making payments on, he’ll be able to afford a repayment plan, under which he will stay current on his mortgage and also make up the arrears over three years. He proposes to pay down the arrears at the rate of $120 a month: $100 for the debt plus $20 a month for the trustee’s fee.
Part of the problem in workouts with a mortgage servicer is that servicers typically add on a wide variety of fees and costs, which make it difficult for the homeowner to reinstate the mortgage. In Chapter 13 bankruptcy, you can challenge the validity of these fees and costs on a variety of grounds. â