How does Bankruptcy to Halt Foreclosure work?
Chapter 13 can stop a foreclosure and provide time to cure mortgage arrears, but it only works if the homeowner can afford the ongoing mortgage payment AND the Chapter 13 plan payment going forward. The U.S. Courts specifically cautions that while Chapter 13 can stop foreclosure and allow delinquent mortgage payments to be cured over time, the debtor must continue making mortgage payments that come due during the plan on time.
That means you may essentially have two major monthly obligations during the bankruptcy case:
1. Your regular mortgage payment
2. Your Chapter 13 plan payment (based partially on the amount of mortgage arrears)
Stopping the Foreclosure Is Only the First Step
Filing Chapter 13 may stop a pending foreclosure, but stopping the immediate foreclosure doesn’t solve the underlying affordability problem. Chapter 13 to halt a foreclosure works best if you had a temporary reason you fell behind on the mortgage, not ongoing or unresolved.
You need a plan that you can actually maintain. If your income is now sufficient to make the ongoing mortgage payment and fund a feasible Chapter 13 plan, Chapter 13 can potentially give you the breathing room you need to recover from a temporary setback. A mortgage creditor will be able to proceed with foreclosure if a Chapter 13 debtor defaults on post-petition mortgage payments.