I'm Behind on My Mortgage. Can Chapter 13 Help Me Catch Up?

You can cure mortgage arrears through your Chapter 13 bankruptcy repayment plan.

If you’re behind on your mortgage, you can catch up on your missed payments by filing for Chapter 13 bankruptcy. It’s one of the primary reasons many file this chapter. Read on to learn more about how Chapter 13 can help you cure your default and save your home.

The Automatic Stay Stops Foreclosure

Even if your home’s foreclosure sale was set for tomorrow, filing for Chapter 13 today would stop it from going forward. Here’s how it works.

The moment you file for Chapter 13 bankruptcy, an order called the automatic stay goes into effect and prohibits your mortgage lender from selling your house (or continuing any other collection efforts).

The stay remains in effect as long as your Chapter 13 repayment plan is confirmed (approved) and you make timely plan payments to the Chapter 13 trustee and continue to pay your ongoing mortgage payments as they come due.

Even though your lender can’t foreclose on your house if you’re curing payments through your repayment plan, if you fall behind on the mortgage during your Chapter 13 case, the court might lift the automatic stay and allow your lender to resume foreclosure proceedings.

Curing Your Default in a Chapter 13 Repayment Plan

Chapter 13 is a reorganization bankruptcy that allows you to restructure your debts through a repayment plan. Unlike Chapter 7, Chapter 13 has a mechanism to catch up on missed mortgage payments. In fact, curing your mortgage arrears through your Chapter 13 repayment plan is required if you intend to keep the house.

The length of your Chapter 13 plan can be from three to five years. However, it can’t exceed five years. Most people can cure mortgage arrears by paying a small portion of the default each month. If you continue to pay your mortgage during your Chapter 13, you will be current on your payments when you complete your plan. As a result, filing for Chapter 13 bankruptcy provides an easy and efficient way to stop foreclosure and catch up on missed mortgage payments.

Example. Jack couldn’t afford to pay his mortgage because of a temporary job loss and is $18,000 behind in mortgage payments. Now that he’s working again, he can resume making mortgage payments. If Jack files for Chapter 13 bankruptcy, he can cure his default by paying $300 (plus interest) to the lender in his Chapter 13 plan over the next 60 months, plus any other required amounts.

Learn more about what happens to your home, mortgage, second mortgages, and more in Your Home and Mortgage in Chapter 13 Bankruptcy.

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