There are two main options when it comes to bankruptcy, and Chapter 13 is the option that typically benefits people who own homes and are behind on their mortgages. If you own a house and are behind on the payments, this branch of bankruptcy could offer some relief to you, and there are two main ways Chapter 13 could help you when it comes to your home mortgage.
It gives you time to repay your past-due balance without the risk of losing your home
The first way Chapter 13 helps people is by offering them an extended time period in which they can pay off their past-due loan payments plus the current ones. This is called a repayment plan, and it is a feature you will have if you use Chapter 13. While this branch will require paying all the past-due balances you owe, it will stop a foreclosure from happening. If you are at risk for losing your home due to falling behind on your payments, this branch of bankruptcy will help you tremendously. Your repayment plan will probably last for five years, and your loan payments will be all caught up when you complete the plan in full.
It offers a way to eliminate junior loans if you are underwater with your mortgage
The other huge benefit of Chapter 13 is the ability it has to eliminate second and third mortgages when people owe more on their homes than the homes are worth. This process is called lien-stripping, and it is commonly used in Chapter 13 cases. To qualify for lien-stripping, you must generally have at least two loans on your house. The first loan is your regular mortgage loan, and the second loan could be a home-equity loan or any other type of loan that is tied to your house.
Secondly, your house must be worth less than the total amount you owe on both loans. If you meet these conditions, you might be able to get the second loan eliminated, which would mean you would only have one loan on your house. If you qualify for this, you will most likely have an easier time paying your bills and saving your house from foreclosure.
If you are in a situation where you are worried you could lose your home, Chapter 13 could be a good option for you to pursue. To learn more about Chapter 13, talk to a bankruptcy attorney today.
