Concern about losing high-value assets may lead an individual to file for bankruptcy. Those who are at risk of losing their most valuable resources may decide to take assertive action to correct their financial circumstances.
Anyone who has missed multiple mortgage payments may feel intense anxiety about the possibility of foreclosure. Their mortgage lender could try to reclaim the home as collateral for the mortgage if they fall too far behind on their obligations. Chapter 13 bankruptcy can be particularly useful for those with above-average income or substantial personal property.
People who fear the possibility of foreclosure may find that a Chapter 13 bankruptcy can help them regain control over their financial circumstances. How can a Chapter 13 filing help those at risk of foreclosure?
1. With an automatic stay
When people file for bankruptcy, the courts intervene to prevent aggressive collection efforts. The automatic stay granted the day that someone files for bankruptcy can prevent creditors from taking aggressive steps to collect on a debt.
Automatic stays can force lenders to cancel lawsuits and halt other aggressive efforts to collect on a debt. The delay of foreclosure proceedings can give homeowners an opportunity to make financial moves that can help preserve their homeownership.
2. With a discharge
Chapter 13 bankruptcy requires a structured repayment plan. After completing the Chapter 13 repayment plan, the filer can qualify for the discharge of their remaining eligible debts.
While their mortgage likely isn’t eligible for discharge because they want to retain the home, the elimination of other debts can make it easier for people to consistently pay their mortgages. Those who reduce their debts may have an easier time fulfilling their financial obligations in the future.
3. With negotiating leverage
The repayment plan isn’t the only financial arrangement that the filer can negotiate during a Chapter 13 filing. Discussing major financial obligations with lenders and creditors is common practice.
The filer may be able to secure certain terms that benefit them in the long run. They may be able to move missed payments to the end of the loan, reduce their monthly payments or extend the overall repayment period.
Recognizing when it might be time to pursue a personal bankruptcy filing because of missed mortgage payments and other financial concerns can help people preserve their most valuable assets. People who pursue a Chapter 13 bankruptcy when they face foreclosure or other life-altering collection efforts can take control of their finances. Filing a Chapter 13 bankruptcy can help homeowners preserve their equity and ensure that their homeownership is not at risk due to temporary financial hardship.