When bills have higher balances due than what you can afford each month, bankruptcy may become an option. One form of bankruptcy that’s sometimes possible is a Chapter 13, which requires you to make regular payments to the bankruptcy trustee.
If you’re a homeowner who has fallen behind on your mortgage, you should understand how the bankruptcy will impact the mortgage. Since this type of bankruptcy is based on repayment of debt over time, there is an opportunity for you to catch up on missed mortgage payments while keeping up on current payments.
How does a Chapter 13 help with catching up on the mortgage payments?
A Chapter 13 bankruptcy can create breathing room in your budget. When the case is filed, an automatic stay is issued. This stops many collection actions, including the foreclosure process. This doesn’t erase the debt, but it can give you space to deal with the mortgage arrears.
The Chapter 13 bankruptcy repayment process takes three to five years to repay. During that time, you must keep up with the payments on the mortgage. Additionally, the arrears are spread out over the course of the bankruptcy so that you’ll be caught up once the bankruptcy is discharged.
It’s not always easy to work through a Chapter 13 to save your home; however, it’s important to work through the process if you want to keep your home. It’s important to understand exactly how the bankruptcy will impact your finances and assets. Working with someone familiar with these matters may be beneficial so you can ensure you’re protecting your rights and upholding your responsibilities.