Can I keep my home in Chapter 13 bankruptcy

Friday 5th of October 2012 01:43:48 AM

It is no secret that the economy has been bad for several years. There have been many job cuts. Raises are not coming, bonuses are smaller or gone entirely. Jobs that are offered pay less than they used to.

Many adults are finding themselves in a financial bind. Often they wonder, “Is Chapter 13 bankruptcy for me? Will I qualify for Chapter 13? Can I keep my home if I’m in a Chapter 13 bankruptcy?  Is that the right choice for me? Can I work out a deal with the lender? ”

Have you already gotten so far behind that they won’t help you? Should you sell your home and downsize to a small payment? Do you need to take on a second job?  Do you make too much money to qualify for a Chapter 7?

All of these questions deserve answers.  For some, the answer is a Chapter 13 bankruptcy.

You can keep your home if you are in Chapter 13 bankruptcy.  In fact, Chapter 13 is commonly referred to as the homeowner’s bankruptcy.  One of Chapter 13′s principle goals is to help homeowners stay in their homes.

There are rules you must follow and it won’t be cheap.  You must know that you will be expected to pay your mortgage as it is currently moving forward, month after month.  You willalso need to pay something toward any arrears (if you have arrears on your mortgage) spread out over 5 years.

However, like a chapter 7, you can, at the same time, seek a discharge of your unsecured (usually credit card) debt.  This one-two punch is an invaluable feature of a chapter 13.  Remember, if you can eliminate your credit card debt, perhaps now you can afford to make your mortgage payments.  You may even be able to eliminate a second mortgage on your home (more on this later).  If you could eliminate your second and your credit card debts, perhaps now you could afford to keep your home?

When you file Chapter 13 bankruptcy you will be in the plan for a 3-5 year period to pay off the arrears. Can you follow through? In some states they take the payment directly out of your paycheck to ensure successful completion of the plan.  Missing a payment is not an option.  Your entire bankruptcy plan may fail.  However, if your income changes over the course of the 5 year repayment plan, adjustments can be requested based on how much you can afford.

While in Chapter 13 bankruptcy, you cannot take on any more debt without permission from the court until you have completed the plan.

If you fall behind again, you may be able to amend your plan to include new debt, but beware of that it could jeapordize your plan and will cost you more attorney fees and court costs. You may be able to work out a deal with the lender to pay extra payments, but you still have to make the Chapter 13 bankruptcy payments. Filing for Chapter 13 bankruptcy isn’t the right path for everyone, consult with an attorney before you make a decision.  Not all bankruptcy attorneys do chapter 13′s; they can be complicated and have a lot of moving parts.  Make sure that your attorney has filed several 13′s before you make a decision.

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