Many homeowners are not aware that if they are facing foreclosure, they may be able to stop the foreclosure sale by filing Chapter 13 Debtor’s Court. In today’s real estate market, this is very important to understand. Mortgage companies continue to increase the burden on homeowners with the exotic mortgage products they have peddled over the last several years, such as adjustable rate mortgages, option-arms, interest only loans, and negative amortization loans.
Home foreclosures are at an all time high in many states. Although Chapter 13 Debtor’s Court may not be the best solution for a consumer who has little to no equity in his home and who is facing rising interest rates, courtesy of an adjustable rate mortgage (ARM), it may be a good option for the homeowner that has substantial equity in their home and is able to catch up on mortgage payments given some time. This, in essence, is what Chapter 13 Debtor’s Court does for the homeowner; it gives him time to catch up on the payments.
When the Chapter 13 case is filed, all back payments owed to the mortgage company, along with fees and costs, are put into the Chapter 13 case, and paid out over a three to five year period. After the case is filed, the homeowner must begin making regular monthly mortgage payments every month and a monthly Chapter 13 payment. The mortgage payments are made directly to the mortgage company. The Chapter 13 payment is made to the Chapter 13 Trustee, who in turn pays an additional payment to the mortgage company for the arrearage (back payments) still owed to the mortgage company. If the homeowner has any additional debt such as credit cards, auto loans, student loans, back taxes or back child support, these debts will be included in the case as well, and paid off over the five year period. The amount of the monthly Chapter 13 payment is directly related to how much debt the debtor has incurred. Thus, if the debtor owes $6,000.00, then the Chapter 13 payment will be around $100.00, but if the debtor owes $60,000.00, then the payment will be closer to $1,000.00.
The most important fact for the homeowner to remember is this…if you are facing foreclosure, you may be able to stop the foreclosure sale by filing Chapter 13 Debtor’s Court. This may not be the solution for all people facing foreclosure; some may need to file Chapter 7 Bankruptcy, while other may not need to file either Chapter 7 or Chapter 13. But Chapter 13 is definitely an option to at least consider if you are facing foreclosure. For additional information about options when facing foreclosure Susan Robicsek has some excellent foreclosure and bankruptcy information.