A volatile economy makes it challenging to keep paying your bills on time when something unexpected happens. Even a relatively simple medical issue may lead to high doctor’s bills and a temporary loss of income. It may only take a few months for your debt to spiral out of control, leaving you with delinquent mortgage payments and the threat of foreclosure.
If you are facing foreclosure but want to keep your home, filing for bankruptcy may give you the opportunity to recover from overwhelming debt without losing your home.
Chapter 13 bankruptcy requirements
According to the U.S. Courts, chapter 13 bankruptcy may allow you to avoid foreclosure on your home. This type of bankruptcy, a wage earner’s plan, requires you to have a regular source of income to meet the eligibility requirements. If you do have a steady income, you may work with the court to develop a repayment plan that generally lasts for three years. During this time, you make reasonable payments to a trustee who distributes the money to your creditors according to the terms of the bankruptcy plan.
Chapter 13 bankruptcy and foreclosure
One of the biggest advantages of chapter 13 bankruptcy is that it halts foreclosure proceedings, allowing you to remain in your home. While you do have to continue making mortgage payments during the repayment term, bankruptcy offers you protection from collections efforts and foreclosure. In most cases, the repayment plan will require you to make your normal monthly mortgage payments and also make contributions toward the delinquent payments. However, because a bankruptcy plan allows you to lengthen the term of all your secure debts over the life of the plan, you may have an easier time making the required bankruptcy payments.