Consumer Practice

Using Chapter 13 to Stop Home Foreclosure

Worried about your mortgage lender foreclosing on your home?

Every Washington foreclosure attorney knows that foreclosure is becoming a serious concern for many homeowners, especially those with adjustable rate mortgages. Consider these statistics from research firm First American CoreLogic. According to a study by this firm, 1.1 million additional home foreclosures are expected between 2007 and 2013. Many will involve adjustable-rate mortgages resetting to higher payments.

Chapter 13 Overview
Chapter 13 is designed for people with regular income who want to pay their debts, but currently can’t do so. It gives homeowners time to cure delinquent payments and avoid foreclosure. To take advantage of Chapter 13, you must file for bankruptcy before a lender sells your home. Given Chapter 13’s complexity, it’s a mistake to try to process a Chapter 13 bankruptcy yourself, without a Washington foreclosure attorney. To protect yourself, you need that Washington foreclosure attorney.

Payment Plan
Under Chapter 13, a plan is developed that provides for repayment of mortgage arrears (and other secured debts). The plan, which lasts three to five years, permits a bankrupt to keep some future income for living expenses. The remainder is paid to a trustee, who pays off creditors, including the lender.

Chapter 13 versus Chapter 7
As a Washington foreclosure attorney can explain in more detail, a Chapter 7 bankruptcy is different because it requires the sale of your assets (except those exempt from bankruptcy) to pay off creditors. As a Washington foreclosure attorney also can explain, Chapter 7 is not as complex as Chapter 13.

Chapter 13 stops foreclosure only if a homeowner makes all required payments under the plan. If the homeowner defaults, even a skilled Washington foreclosure attorney may not be able to prevent the court from removing Chapter 13’s protection. If that happens, Chapter 13 no longer prevents foreclosure.

For homeowners facing foreclosures, Chapter 13 is good news. If you’re concerned about foreclosure, contact a Washington foreclosure attorney about your rights and responsibilities under Chapter 13.