Law Office of Javier H. Castillo

 What is Mortgage Foreclosure?

Foreclosure, in simplest terms, is the process by which the bank or mortgage company that has a lien on a piece of real property takes that property back because the borrower / property owner hasn't complied with the terms of the mortgage agreement. Most often, this is because the borrower has fallen behind on payments.

The exact foreclosure process differs somewhat from state to state, but the real problems usually begin when mortgage payments are 16 days past due. Although it is still possible to work out a repayment plan with the lender at that point, many homeowners do not. This may be because they're still in the midst of the financial difficulties that caused the past-payment, or sim

ply because they're hoping things will get better with the next paycheck or the next month or some other change in circumstances.

Unfortunately, many people delay too long while hoping for things to get better. If a homeowner has significant equity - usually at lest 15 - 25 percent - in the home and is less than 90 days past due, there may be a variety of possible ways to stop foreclosure, including refinancing. However, once a loan is more than 90 days past due, or if the homeowner doesn't have significant equity-which is often the case due to creative financing options-refinancing can be difficult. In those cases, Chapter 13 bankruptcy may still allow the homeowner to stop foreclosure.

How Can Chapter 13 Bankruptcy Stop Foreclosure?

Many people file for Chapter 13 bankruptcy specifically to stop foreclosure. In most cases, an automatic stay is entered as soon as a Chapter 13 bankruptcy petition is filed. The automatic stay will temporarily stop foreclosure, along with all other collection action, regardless of the stage of the foreclosure proceedings. With the automatic stay in place, the debtor and his attorney have the breathing room to work out a Chapter 13 repayment plan.

How Does Chapter 13 Bankruptcy Work?

Within 15 days after filing a Chapter 13 bankruptcy petition, the debtor must file a proposed plan, setting forth his income, allowable living expenses, and proposed payments to the trustee for the benefit of creditors. Current payments must be kept current after the Chapter 13 bankruptcy petition is filed.

Homeowners must make all mortgage payments that come due during the Chapter 13 bankruptcy repayment plan, and failure to make current payments on time may mean that the bankruptcy court lifts the automatic stay and allows the mortgage company to resume foreclosure proceedings. Assuming that all plan payments are made in a timely manner, the homeowner may catch up the past due mortgage payments over the 3-5 years of the repayment plan, or may discover that he is eligible to refinance the property after a period of repayment.

Who Can File for Chapter 13 Bankruptcy?

Generally, a homeowner can file a chapter 13 bankruptcy to stop a mortgage foreclosure if the homeowner:

• Is employed or has another regular source of income
• Has sufficient income to make Chapter 13 plan payments as well as all current mortgage payments and living expenses
  
• Does not have debts in excess of the statutory caps for Chapter 13 bankruptcy

A consumer bankruptcy lawyers in your area can help you assess whether Chapter 13 bankruptcy is the right option for you, and can help you structure a repayment plan that works for you and your creditors. Get started by filling out our free bankruptcy case evaluation form  or calling 951-686-2860, and we'll help you get in contact with a local bankruptcy attorney as soon as possible.

What We Do

Help home howners to keep their dreams.