Losing the roof over your family's head is a terrifying situation. Your home provides security for the people you love and the things you worked hard to obtain. It is a place where you make memories, watching your children grow into young adults and celebrating life events with family and friends.
Your mortgage lender may understand the personal value of your home or empathize with you if you lost your job, were in an accident or became a victim of the housing market when it crashed. None of this will prevent lenders from foreclosing on your home, but through Chapter 13 bankruptcy, you can prevent them from doing so.
Filing under Chapter 13 of the federal Bankruptcy Code does not eliminate your mortgage or permanently take away your lender's right to foreclose. Filing for bankruptcy gives you the time and the tools you need to help bring your mortgage current and resolve the underlying debt issues that contributed to the missed payments.
The process for saving your home under Chapter 13 involves essentially five steps:
- Step 1: File for bankruptcy and stop the foreclosure process. When you file for bankruptcy, a tool called the automatic stay halts the foreclosure process and temporarily prevents your lender from taking your home. It goes into effect immediately and can stop a foreclosure sale if you file at least one day prior to the sale.
- Step 2: Assess your financial situation. With the automatic stay in place, you have time to step back and assess your entire financial situation with an attorney but without the pressure a foreclosure threat puts on your shoulders.
- Step 3: Develop a plan to resolve your mortgage debt. With a complete picture of your situation and your priorities, your attorney can help you develop a repayment plan you can afford. Your plan helps address all of your debt, not just your mortgage. If you have a second, third or even fourth mortgage, you may be able to strip the associated liens on your home, reclassifying them as unsecured debts. The court can discharge them as unsecured debts.
- Step 4: Make payments under the plan for three to five years. The typical plan lasts from three to five years. While you will still make mortgage payments, the plan makes it much easier to do so. Not only does it take into account your income and ability to pay, but the payments go straight to principal and do not include interest. During this time, you can also work with your lender to modify the loan.
- Step 5: Move into the future with a fresh financial start. When you successfully complete your repayment plan and exit bankruptcy, the court will discharge the remainder of your unsecured debt in most cases. Keep in mind that this includes mortgage liens that were stripped as part of the plan.
At a time when everything seems hopeless, you need to remember that you can always make your financial life better - and Chapter 13 can help you keep your family in the home they need, love and deserve.
Bankruptcy is a powerful tool homeowners and your right. By law, you are entitled to use bankruptcy to help save your home. Practically speaking, your chance of success can depend on the attorney you choose to guide you through the process.
At Ozment Law PA, my mission is to help make the financial lives of people struggling with debt better. I have practiced bankruptcy law in Florida for more than 25 years, handled over 10,000 bankruptcy cases and own a real estate and title company. Resolving mortgage issues are my passion and my forte.