How Chapter 13 bankruptcy can safeguard your home

 Posted on December 16, 2023 in Home Ownership and Bankruptcy

Facing financial difficulties can be overwhelming, especially when it jeopardizes the roof over your head. However, there is a legal option that can help you keep your home while working toward resolving your debts: Chapter 13 bankruptcy.

Chapter 13 bankruptcy is a financial remedy designed to assist individuals in reorganizing their debts and creating a manageable repayment plan. While Chapter 7 bankruptcy makes you liquidate most of your assets so that you can pay off your debts, Chapter 13 allows you to keep most of your assets, including your home, as long as you meet certain requirements.

Halt foreclosure

One of the most significant benefits of filing for Chapter 13 bankruptcy is the automatic stay it imposes on foreclosure proceedings. Once you file for Chapter 13, creditors, including your mortgage lender, must immediately halt any efforts to foreclose on your home. This temporary relief gives you time to restructure your debts and develop a repayment plan.

Repayment plan

Under Chapter 13 bankruptcy, you will work with the bankruptcy court to create a repayment plan tailored to your financial situation. This plan usually takes from three to five years and consolidates your debts into manageable monthly payments. You can include the back payments you owe on your mortgage in this plan, allowing you to catch up on missed payments while staying current on your mortgage from now on.

Protecting your home equity

Chapter 13 bankruptcy not only helps you retain your home but also safeguards your home equity. In many cases, you can keep all of your property and assets, even if they exceed the value of your debts. This is particularly advantageous for homeowners who have substantial equity in their homes.

Plan flexibility

Another advantage of Chapter 13 bankruptcy is its flexibility. If your financial circumstances change during your repayment plan, the court may modify the plan to accommodate your new situation. This adaptability ensures that you can continue working towards your financial goals without unnecessary hardship.

Discharge of remaining debts

Upon successfully completing your Chapter 13 repayment plan, they may discharge any remaining unsecured debts, such as credit card balances and medical bills, providing you with a fresh financial start.

The number of bankruptcy filings in Maryland increased by nearly 25% in 2023. Many people find relief through this process. If you might lose your home due to financial difficulties, exploring Chapter 13 bankruptcy as a potential solution is a wise step to consider.