Many people find themselves behind on their mortgage payments because of an unforeseen event like a job loss, a business problem, an expensive medical event or a divorce. Some consumers consider a Chapter 13 bankruptcy filing to stop the foreclosure process and save their homes.
Foreclosure threats can bring massive stress. If you are thinking about Chapter 13, what do you need to know about preventing foreclosure of your home? Here are four important things to consider.
1. Chapter 13 can end the frustration and fear
It is easy to feel frustrated and scared when you have done everything in your power to get your mortgage back on track, to no avail. Mortgage servicers are notorious for being disorganized and unhelpful to homeowners who are struggling. Many customers report getting the runaround from multiple phone representatives, having their documents lost repeatedly and being told radically conflicting stories about their accounts. Chapter 13 puts a stop to these problems.
2. Two mortgage-related benefits of Chapter 13
A Chapter 13 bankruptcy filing can do two powerful things to help you keep your home if you qualify:
- The filing will stop the foreclosure process even if a sheriff's sale has been scheduled.
- The filing can enable you to set up a payment plan to deal with mortgage arrears.
3. Chapter 7 may be a better solution for you
Everyone's debt situation is different. If you have high unsecured debts (like credit cards and medical bills) and you pass the means test, Chapter 7 might be a better solution than Chapter 13. If you are able to discharge lots of debt through Chapter 7 liquidation, it may be easy to get caught up on your mortgage payments.
4. Bankruptcy may not be necessary
Some homeowners don't need bankruptcy to prevent foreclosure. They may need a repayment plan or loan modification to get caught up on their mortgage.
The more knowledge you have, the easier it is to make informed choices about foreclosure prevention and bankruptcy.