Will Filing Chapter 13 Help Me Save my House from Foreclosure?
The question about filing chapter 13 and whether it will save a homeowner from foreclosure is a common question and a valid one. First of all, lets define some terms.
Chapter 13 - A consumer debt reorganization which allows a person to restructure payments by putting together allowable debts into one monthly payment. This payment is made to the Chapter 13 Trustee and must be promised out of future income. Mortgage payments continue to be made to your mortgage holder seperately from what you have negotiated in the reorganization plan. It is possible that the amount of arrears can be included in your plan, depending on your situation. The homeowner keeps the property, making mortgage payments, and makes payments to the trustee over the life of the plan, usually 3 to 5 years.
You can already see that Chapter 13 will work for the homeowner who has had a temporary financial setback that can be remedied. It will not work for the homeowner with an adjustable mortgage that is due to increase. The problem is not enough income to pay that increasing mortgage, so no amount of reorganizing will give the homeowner the added income to pay the increase.
If the future income is shaky or unsubstantiated, that makes it difficult to obtain a reorganization plan. Those who got a stated-income mortgage (which are now illegal in Maryland) will have trouble. If you have the proven income, then you stand a better chance.
Whether Chapter 13 will work for you depends on what caused the default in the first place. Most of the time the bankruptcy only stalls the inevitable foreclosure.
There have been many changes in bankruptcy law, the most recent federal change, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. To know whether you are a candidate for bakruptcy, and what classification, contact a reputable bankruptcy Attorney. You would do well to get second opinions.
The main drawback to bankruptcy is that it makes it very difficult for the homeowner to sell his property once he enters into the process. The process can be lengthy, and if you find that you need to sell, you have to rely on the willingness of the trustee to release the property from the proceedings and allow it to be sold.
If you or someone you know is having trouble making your mortgage payment, contact us; we can explain your options and we may be able to help you avoid foreclosure.
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The Highland Group - Real Estate Teams
Chris & Karen Highland
Frederick County MD Real Estate Agents
Specializing in Frederick County Real Estate
301-831-9947
Real Estate Teams, LLC
isell4u2@msn.com
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