Homeowners facing bankruptcy often wonder if they can save their homes through the bankruptcy process. While Chapter 7 bankruptcy provides you with a little bit more time to resolve your pending foreclosure, Chapter 13 is different, and it allows you to save your home over a longer period.
There are a few ways that Chapter 13 helps you stay in your home.
You pay your past-due balance over time
Instead of having to surrender your assets to ease the financial obligation, Chapter 13 allows you to spread the past due amount over the repayment period. Your repayment schedule takes the loan out of foreclosure as long as you meet your current mortgage payment and your bankruptcy payment schedule.
You have a say in the repayment schedule
Your Chapter 13 repayment schedule depends on many factors, but you play an active role in determining the repayment period. Your repayment may last from three to five years. This helps ensure a financial obligation you can afford each month.
You may be able to remove a second mortgage
When your home loses value after purchase, that leaves you owing more on your mortgage than the home is worth. Sometimes, Chapter 13 bankruptcy allows for lien stripping, which removes a second or third mortgage in these cases.
Financial challenges are common. Understand the means for saving your home through a Chapter 13 bankruptcy so you can restructure your payments and preserve your assets. When you have the means to make go-forward payments, this may be an ideal solution.