Chapter 13 Bankruptcy: Can It Save Your Home From Foreclosure?

By Simon Volkov

Chapter 13 Bankruptcy is an option for people facing foreclosure. While it is true filing bankruptcy can halt the foreclosure process, it is not without risk. If you fail out of bankruptcy you will lose your home, so it is very important to understand how Chapter 13 works.

Also known as Wage Earner’s Plan, Chapter 13 is the most common type of bankruptcy filed in the United States. Chapter 13 allows people to retain their personal possessions including vehicles, real estate and other assets. Individuals who file are also able to reorganize their debt and repay over a period of three to five years.

Although Chapter 13 Bankruptcy is available to all U.S. citizens, certain eligibility requirements must be met. According to United States Bankruptcy Law U.S.C. 109,111, unsecured debts must be less than $307,675 and secured debts less than $922,975. Additionally, individuals are required to obtain credit counseling through an approved credit counseling agency within 180 days prior to filing.

The majority of people facing foreclosure are already under a tremendous amount of stress. Although individuals can file Chapter 13 on their own, most prefer to hire an attorney to represent them. Filing bankruptcy entails preparing considerable paperwork and specific forms. It’s best to work with a bankruptcy attorney to ensure paperwork is properly filed in a timely fashion. For those unable to afford an attorney, free legal assistance is available through state and county chapters of the American Bar Association.

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The first step of Chapter 13 involves filing a petition with the Bankruptcy Court in the judicial district where the individual resides. The petition must include a list of assets and liabilities, current income and expenses, proposed repayment plan and proof of credit counseling.

Within three to six weeks after filing the petition, a creditors meeting will be arranged. A Trustee will be assigned to oversee the meeting. Creditors are allowed to ask questions and either accept or reject the proposed repayment plan. If a creditor decides to move forward with collection, they must file their claim with the court within 90 days of the meeting.

Once creditor claims have been filed a court hearing will scheduled. The individual filing Chapter 13 must appear in front of a Bankruptcy Judge who will review the repayment plan. The judge may either accept or reject the plan or make modifications to it.

Upon approval of the Chapter 13 bankruptcy repayment plan, the individual must submit regular payments to the Trustee until the reorganized debts are paid in full. During this time, the individual cannot incur any new debt without approval of the Trustee. In order to receive approval, the new debt must be necessary in order for the individual to maintain or improve their life. This might include the need to replace an automobile or obtain a loan for higher education.

Chapter 13 Bankruptcy has undergone dramatic changes within the last few years. With the skyrocketing surge in foreclosures, many people are scrambling to find a way to save their home. Chapter 13 may or may not be the answer. If an individual agrees to repay their mortgage payment and later becomes unable to keep their commitment, the lender can move forward with foreclosure proceedings.

Chapter 13 Bankruptcy is a complex and lengthy process. However, it can significantly improve people’s financial situations and help them get back on track. It can also keep people on an excruciatingly tight budget that leaves no room for emergency expenses.

Other options exist to keep a home out of foreclosure including loan modifications, short sales and Deed in Lieu of Foreclosure. Experts recommend communicating with the Loss Mitigation Department of the lending institution who holds the mortgage note. Bank loss mitigators oftentimes can offer solutions to individuals facing foreclosure that are not as drastic as filing bankruptcy.

Before making a final decision it’s highly recommended to conduct research via the Internet or by consulting with a qualified bankruptcy attorney. Additionally, Chapter 13 Bankruptcy manual and forms can be downloaded at U.S. Bankruptcy Courts at

About the Author: Simon Volkov is a private investor who specializes in helping individuals quickly liquidate their assets. Simon offers solutions to individuals facing foreclosure, probate and

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