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Nashville Office 615-256-8300
Cookeville Office 931-400-2218

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Chapter 13 and foreclosure: Does the bank actually WANT my house?

On Behalf of | Dec 21, 2017 | Blog |

It’s incredibly stressful to live in fear of imminent foreclosure. If you’re behind on house payments, your mortgage servicer may have started the hostile letters and aggressive talk about selling your house out from under you. You may be terrified about what this means for your family, and you may thinking about filing a Chapter 13 bankruptcy in order to keep your house.

It is important to fix the problem that caused you to miss house payments in the first place — perhaps it was an income loss, a divorce or an expensive illness. It is also essential that you have a strategy to deal with the foreclosure threats. But are those threats real, and does the bank actually want your house? It depends.


Yes, Chapter 13 stops foreclosure

Yes, a Chapter 13 will stop foreclosure proceedings and force your lender to allow you to make up mortgage arrears on a prescribed payment plan. But you should understand a few basic things about what foreclosure is and isn’t:

  • Foreclosure is a multi-stage process that a lender must go through to take a property. In Tennessee (and other states), this process is defined, in detail, by law.
  • Receiving a scary letter about foreclosure doesn’t mean you will lose your house.
  • The foreclosure process culminates in a “sheriff’s sale” or auction sale of a property. Generally, you have to be several months behind on mortgage payments for a sale to occur.
  • If a sale date has been scheduled for your property, you could lose your home.
  • Even if there is a sheriff’s sale scheduled, you can probably still stop it by filing Chapter 13.

The fear factor

Banks and mortgage lenders, like many other creditors, use fear to get payments because fear works. If you’re scared of losing something important to you, you’re more likely to cough up money. Of course, you need to make mortgage payments if you want to keep your house, but you can get beyond the fear if you have a workable plan and a proper relationship between your income and your expenses.

The answer to the question about whether the bank actually “wants your house” will depend on two basic elements: the value of the home and the amount owed on your mortgage. For example, if your house is worth $140,000, but you have a first mortgage for $176,000, the math is not good for the bank. If your $140,000 home is almost paid off, though, that’s easy money for a lender, and they’d definitely want it, theoretically speaking.

What you should do now

Every mortgage is different. Every debt situation is different. Bankruptcy is not appropriate for everyone, but it is a lifesaver for some.

If there is a foreclosure sale date set for your house, you should get help immediately. You may be able to keep your property through a Chapter 13 bankruptcy or through other means.

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