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Filing for Chapter 13 bankruptcy allows you to keep your home in several ways. The first is through the automatic stay which prevents your creditors from harassing you while your case is under way. The second is through a repayment plan that allows you to repay the arrears on your mortgage over several years. The first offers a temporary respite, while the latter is a more permanent solution.
Chapter 13 bankruptcy and mortgage
When you file for Chapter 13 bankruptcy, you do not lose any property. If you are behind in mortgage payments, Chapter 13 allows you to keep your home and pay the mortgage average over 5 years.
Payment methods
In a Chapter 13 bankruptcy, if you are current on your mortgage payments, you can make your payments to your mortgage lender directly. If you are behind on your mortgage payments, will compel you to make your mortgage payments through a Chapter 13 bankruptcy repayment plan, wherein the trustee will receive your money and pay the lender on your behalf.
A Chapter 13 bankruptcy exclusive
Repayment periods usually last three to five years. You’ll have to complete your mortgage average before or by the end of the allotted repayment period if you want to keep your home. This feature is exclusive to Chapter 13, that’s why many Raleigh homeowners who are about to foreclose on their homes choose Chapter 13 over Chapter 7 bankruptcy.
Lien stripping
If you have a second or third mortgage, Chapter 13 bankruptcy sometimes allows you to strip these loans off via a process called ‘lien stripping.’ The stripped off loan gets categorized as unsecured debt, which is usually paid at only pennies on the dollar through your Chapter 13 plan. Once the repayment period expires, remaining loan amounts on stripped off mortgages are discharged.
To know if Chapter 13 bankruptcy can work for your particular situation, schedule a consultation with Chapter 13 and Chapter 7 bankruptcy lawyers in Raleigh, NC such as those at Weik Law Office, Bankruptcy Attorneys.
Sources:
Your Home in Chapter 13 Bankruptcy, Nolo.com
How Chapter 13 Bankruptcy Affects Mortgages and Foreclosure, AllLaw.com