Foreclosure is currently at epidemic levels within the United States. In May of 2010, one in every 399 homes went into foreclosure. This is only the icing on the cake for many homeowners. The number of foreclosures has skyrocketed since the beginning of the collapse in the housing and credit markets in 2007. The bad news is that there is no end in sight.
Homeowners who are seeking relief from foreclosure filings cannot breathe easier because unfortunately the foreclosure epidemic is actually showing signs of increasing. Even bankruptcy is not providing the haven that it used to. While chapter 7 bankruptcy protection does not prevent foreclosure, chapter 13 does. The credit crisis has resulted in homeowners across the United States having less liquid funds than they had approximately three years ago.
Since chapter 13 requires the debtor to file a repayment plan with the bankruptcy court, if the debtor has no money with which even to fully cooperate with a five-year repayment plan, chapter 13 will do absolutely nothing for them or for their creditors. However, chapter 13 can halt foreclosures as long as the debtor files for bankruptcy before the lender legally completes the foreclosure process and sale. This process takes about a year in most states, so the debtor usually has plenty of time.
Upon filing the petition with the bankruptcy court, the provision known as "automatic stay" immediately goes into effect. This provision halts all processes of collection including foreclosure against any and all of the debtor's real and personal property. Once the debtor files the petition, the trustee of the bankruptcy court must convene a meeting of creditors within twenty to fifty days.
For as long as the debt repayment plan is in effect, no creditor may initiate collection proceedings against the debtor or even make phone calls demanding payment. Thus, chapter 13 prevents the creditor or creditors from seizing property while giving the debtor an opportunity to repay their loans in full and keeping up with their remaining payments. It must be emphasized that chapter 13 will not prevent foreclosure if the debtor falls behind on their payments again after the repayment plan is completed.
The key thing to remember is that chapter 13 only works if the debtor has enough liquid funds to pay even the most minimal of amounts towards their goals. If the debtor does not have the funds to even pay this much, the debtor is left with few options.
Filing for bankruptcy under chapter 13 can stop foreclosure if the debtor has enough money to cover their debts under a repayment plan. The main advantage is that the debtor creates and files the repayment plan themselves, freeing them from creditor harassment and threats of legal action. Chapter 13 allows the debtor to bring their missed payments forward over a period of time, which in turn enables them to continue making the payments later. Debtors can then breathe easier because their debts have been taken care of without losing their home or their livelihood.
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If you live in Alabama, Florida, Missouri, New York or Wyoming, please click here for additional information.
By an Act of Congress and the President of the United States, we are a federal Debt Relief Agency. Attorneys and/or law firms promoted through this Web site are also federally designated Debt Relief Agencies. They help people file for relief under the U.S. Bankruptcy Code. Disclosures Required Under the U.S. Bankruptcy Code.