Updated: Apr 29
Yes, bankruptcy can help you save your home from foreclosure. In a Chapter 13 bankruptcy you keep your home, resume making your regular monthly mortgage payments, and a repayment plan is set up to allow you to pay any past due amounts on the mortgage. Not only would a Chapter 13 bankruptcy allow you to stop the foreclosure and bring your mortgage payments current but you may also be able to eliminate any additional debts that you may have, such as credit card debt or medical bills.
So how does it work?
For example, John Doe is now facing foreclosure after being laid off work due to a pandemic. The bank is demanding a $12,000.00 lump sum payment to stop the foreclosure proceedings, which John is not able to make. The loss of his job also caused John to incur $9,000.00 in credit card debt and $5,000.00 in medical bills.
John's bankruptcy attorney will work with John to develop a repayment plan that will allow John to not only repay the $12,000.00 he owes the bank, but also to handle the $14,000.00 in credit card and medical debt John has incurred. After consulting with his attorney, John's bankruptcy plan may allow John to make a $450.00 payment for 60 months to cover all of John's debt. This would allow John to keep his home, payoff the mortgage arrears, and payoff the credit card and medical debt.
But what if John could only afford to pay $350.00 per month towards his bankruptcy plan. In this situation John's attorney may be able to arrange a payment plan where John would pay $350.00 per month for 60 months. This plan would allow for the mortgage arrears to be paid in full while the credit card and medical debt will only be paid a percentage of the the total amount owed. The good news is that as long as John completes his bankruptcy plan the remaining amount owed on the credit card and medical debt is completely wiped out and John has no obligation to pay them.
So while John's situation may have seemed impossible at the beginning, by working with a bankruptcy attorney John is able to come up with a plan to save his home and eliminate his debt.
To learn more about the pros and cons of bankruptcy, call our office at (502) 473-6446 for a free confidential consultation.