If you cannot make the payments on your home, you may feel that you have no choice but to go into foreclosure and move out. However, there is a strategy that can allow you to clear your debts and stay in your home. Known as chapter 13 bankruptcy, this legal tactic can be the ideal solution for someone at risk of losing their home.
If you have never heard of chapter 13 bankruptcy, then you may have many questions about it. Below, we have provided an easy to read frequently asked question list related to chapter 13 bankruptcy and home ownership.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a bankruptcy filing available in the United States. When you declare Chapter 13 Bankruptcy, a court can allow you debts to be readjusted and paid off through a court approved payment plan. The plan can last anywhere from three to five years.
Who is involved in a Chapter 13 Bankruptcy?
Generally, there are going to be four parties involved in a Chapter 13 bankruptcy:
The filer - The filer is going to be the person who owes the money to the lender and who will be filing the Chapter 13 Bankruptcy.
The creditors - These are the people who the filer owes money. This includes the mortgage company and anyone else who can lay a claim to the filer’s assets.
The court - The court provides legal protection to the filer while they are in the process of reorganizing their debts. Your creditors cannot take any legal action to collect a debt from you while you are under the Courts protection. A Bankruptcy Judge will supervise the Chapter 13 Bankruptcy proceedings.
The trustee - The trustee is the court appointed officer who will be in charge of overseeing the actions during the Chapter 13 Bankruptcy period. For instance, they will make sure that the filer is making the payments and will conduct audits of the filer’s case to ensure that the filer is not committing any fraud and is complying with the terms of the Chapter 13 Plan.
Will filing Chapter 13 Bankruptcy stop a foreclosure?
When you file a Chapter 13 Bankruptcy, the Court will place an automatic stay which stops the lender from conducting a foreclosure sale. Therefore, if you want to save your home, then you need to make sure that you file for Chapter 13 Bankruptcy protection before the foreclosure sale occurs. Learn more about stopping a foreclosure in Michigan.
Can I stay in my home in a Chapter 13 Bankruptcy?
You can stay in your home as long as you make your regular payments to your mortgage lender. It is also important to keep in mind that you will have to pay your mortgage payment to the trustee in the bankruptcy case and they will remit the payment to the mortgage lender.
Can I pay all of the missed payments on my house in a Chapter 13 Bankruptcy?
You can pay all of the missed payments on your house in a chapter 13 bankruptcy. However, it is important that all future mortgage payments are made to the Trustee on time and in the full amount along with a little extra to make up for the missed payments. While you are in a Chapter 13 Bankruptcy, the lender will still have a lien on the property. If there are any missed payments, then the lender will be able to foreclose on the property after they have received relief from the Court for the failure of the filer to make the necessary payments.
What happens if I miss a mortgage payment in a Chapter 13 Bankruptcy?
If you miss some payments while in a Chapter 13 bankruptcy, you need to contact your lawyer immediately and inform them of what is going on. If payments are missed because of a brief disruption in pay (off work because of a sickness or some other temporary loss of work), your attorney could petition the Court to excuse those missed payments and inform the Court how those payments are going to be made up. Therefore, if you are in Chapter 13 Bankruptcy, it is important that you make your mortgage payment each and every month or contact your attorney immediately if you should miss some payments.
Can I sell my house during a Chapter 13 Bankruptcy?
Yes, you can still sell your home even if you are in the middle of a Chapter 13 Bankruptcy. Once you have found a buyer and worked out the terms of the sale, you will have to seek the approval of the bankruptcy judge to complete the process.
Can I pay off my Chapter 13 Bankruptcy plan early?
You will not be able to finish your Chapter 13 Bankruptcy payment plan early unless you are paying off all of your creditors in full and have brought the mortgage payments current. Therefore, you will have to stay in the Chapter 13 Bankruptcy for the full three to five-year period of the plan.
What happens if I sell my house while in a Chapter 13 Bankruptcy?
If you do get court approval to sell your home, the mortgage will be paid off and some of the proceeds from the property sale may go to your creditors. The amount that may go to your creditors is determined based on the sale amount and the amount of equity that may be left over after the mortgage is paid off. The Bankruptcy filer may be able to protect a portion of the sale proceeds because of exemptions that are provided for under the Bankruptcy Code. An exemption is a way to shelter a portion of the equity in your home.
Can I refinance my mortgage in a Chapter 13 Bankruptcy?
It is legal to refinance your home during a Chapter 13 Bankruptcy. Unfortunately, most lenders will not currently refinance home mortgages because of recent legislation under the Dodd Frank Act. All the terms on your mortgage will remain the same throughout your Chapter 13 Bankruptcy.
Can I walk away from my house during Chapter 13 Bankruptcy?
Yes. If you no longer wish to keep your home and are unable to sell the house for more than what is owed on it, it is possible to walk away from your home and hand over the property to the lender.
Is my mortgage debt discharged when I exit Chapter 13 Bankruptcy?
A Chapter 13 Bankruptcy will not eliminate the lien on your home, unless the home is completely paid-off through the Bankruptcy. However, you may be able to remove a wholly unsecured junior lien. The junior lien will be classified as a non-priority unsecured debt and can be eliminated when you exit Chapter 13 Bankruptcy. Learn more about a Chapter 13 discharge.
What is the success rate of Chapter 13 Bankruptcy?
The success rate of a Chapter 13 Bankruptcy is about 48-55=%. Acclaim Legal Services has a higher than average completion rate compared to the national average (88% confirmation rate; 69%+ discharge rate). We have a staff of Attorneys that are with you the entire time you are in a Chapter 13 Bankruptcy. If you should experience problems during your case it is important that you contact our office so that we may assist you and keep your case on track. The majority of Chapter 13 Bankruptcies fail because people are not able to keep up with their payments because of an illness or some other loss of income. Therefore, if you want to keep your home while in Chapter 13 Bankruptcy, it is important that you do not miss payments. If payments are missed, as stated above, you need to contact your attorney immediately so that they may assist you.
What if I voluntarily dismiss a Chapter 13 Bankruptcy?
If you dismiss your own bankruptcy (not keep up with the payments), then you will owe your creditors in full minus the payments that you did make. At this point, the lender who has a lien on your property can proceed with the foreclosure sale if the mortgage arrears were not paid and the house brought current during the Chapter 13 Plan.
Staying in your home after a Chapter 13 Bankruptcy
Chapter 13 Bankruptcy can save you from losing your home. Be sure to keep current with all of your payments while you are in Chapter 13 Bankruptcy in order to stay in your home. If you have any other questions about Chapter 13 Bankruptcy, then be sure to contact an attorney who specializes in Chapter 13 Bankruptcies.
Why Acclaim Legal Services?
With over 120 years of combined legal experience, we are leaders in our district and the State of Michigan. Our practice specializes in administering Chapter 13 cases and the results speak for themselves.
We offer a free consultation to guide you in the decision-making process.
Call us today at 866-261-8282 for a free consultation with a licensed Michigan bankruptcy attorney or click here to schedule online.
We would like to say thank you to Acclaim Legal Services- especially to Cindy Millns and Christopher Jones for helping us with the Chapter 13 process.
We appreciate all that you have done for us – you were always there to answer any questions that we…
It has been a pleasure working with Cindy Millns and Atty Chris Jones. They answered my email with concerns right away. They guided me through. And Cindy, she is very friendly and always ready to answer my questions. Overall, I will give them 5 shinning stars.
My wife and I would like to thank you for your assistance in handling our bankruptcy. Believe me, it was very hard to admit that we had a serious financial problem. Thanks to the professionalism of all your staff, we have been able to overcome our embarrassment…
Dear Julie, Thank you for the follow-up on our home foreclosure situation. We managed to borrow the money for our relatives to pay the reinstatement fee. Although it was very embarrassing, we felt it was the best course of action. I would like to thank you for all your help. We did talk to a couple…