Can You Stop Foreclosure with Chapter 13 Bankruptcy?

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I get calls on a regular basis from Montana homeowners who need foreclosure help. Like many Americans, Montanans who have fallen on hard times and lost their jobs have not been able to keep up with mortgage payments, as a result, they are in foreclosure. I’ve also chatted with quite a few folks who were fraudulently put into foreclosure due to something as simple as a paperwork error.

Foreclosure, like a moving train, is difficult for one person to stop. Even if you get a new job and can once again afford your mortgage payments, the lender–as is the case all too often–won’t work with you to restructure your mortgage.  They say they will, the Obama administration says they have programs in place to assist you, but this is mostly bait and switch. When the lenders say they’ll  “work with you” it usually means the friendly people on the phone will screw you on their terms.  The lender has the power of decision making authority and the final word to approve a deal or not.

One way to stop foreclosure is a Chapter 13 bankruptcy. As soon as you file for Chapter 13, an automatic stay takes effect which will temporarily stop all creditor collection activity, including foreclosure, lawsuits and phone calls.

In addition to being able to stop foreclosure, Chapter 13 allows you to catch up on missed mortgage payments. We call this “curing the arrearage.” For example, if you are $10,000 behind, you could propose to cure that arrearage by paying $200 per month into a five-year plan to do this. (If you are only $5,000 behind, you could propose $100 per month to cure the arrearage.) You’d also likely have other debts to deal with such as car payments. These, too, would be paid in your plan.

Chapter 13 bankruptcy allows you to do what your mortgage lender won’t and on your terms, or terms approved by the Court. You simply pay a bit extra each month and get caught up on payments over time.  The lender does not have the final word: the Court does. You get better results if the lender does not have the final word.

There are a few caveats to using Chapter 13 Bankruptcy to stop foreclosure.

  • You must file bankruptcy before the house is sold. Once the gavel drops, the house is no longer yours.
  • You must be able to resume making your regular, ongoing mortgage payments and, at the same time, pay an additional amount into your Chapter 13 plan to cure the arrearage. If you can’t make these payments, a judge will not approve the plan.
  • Chapter 13 Bankruptcy won’t lower the interest rate of your mortgage.

For many people, Chapter 13 bankruptcy is a great foreclosure avoidance tool, especially when the reason for the mortgage arrearage was a temporary loss in income. If you are facing foreclosure in Montana and need foreclosure defense, do not wait until the last minute to contact a board-certified Montana bankruptcy lawyer. If you wait until the last minute, it will be very difficult to stop the foreclosure in time to save your home.

Contact Cossitt Law at (406) 752-5616 to lean how we can help you avoid foreclosure.


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