Using Bankruptcy to Stop Foreclosure - Chapter 13

Many clients or potential clients ask how Chapter 13 bankruptcy can help foreclosure, and whether Chapter 7 bankruptcy would help with foreclosure.  Any bankruptcy petition will generally delay a foreclosure, because the filing of a bankruptcy petition automatically stop all collections activity, including foreclosures.  There are exceptions when someone has filed multiple bankruptcies within a certain period, but for any first-time bankruptcy filer, filing bankruptcy automatically stops a foreclosure, even if it is immediately before the foreclosure.

Chapter 13 bankruptcy can help stop and solve a foreclosure problem altogether, because the filer can use their Chapter 13 plan to catch up on their mortgage payments and bring the loan current.  In addition, the filer may be able to eliminate second mortgage or equity lines altogether if the value of the house is less than the balance of the first mortgage.  

In short, Chapter 13 bankruptcy offers an immediate stop to foreclosure, and possibilities for completely fixing the forelcosure problem with a simple, low cost solution.  At the same time, it can be used to wipe out dis-chargeable debts by paying pennies on the dollar, or to catch up on overdue taxes.

If you are at risk of foreclosure, you should discuss the matter with a bankruptcy attorney so you know your options. - honakerlegal