One of the primary advantages of filing for Chapter 13 bankruptcy over Chapter 7 is that you can save your home from foreclosure. In order to stop foreclosure, you must have enough disposable income to meet your basic living expenses, meet your current mortgage payment and also pay off past due payments owed the lender. An experienced Montgomery bankruptcy attorney can help you gauge whether you can use Chapter 13 to stop foreclosures and develop a reasonable debt repayment plan.The Alabama Foreclosure Process
A lender starts the foreclosure process when a homeowner falls behind on his or her mortgage payments. The lender notifies the homeowner that it will sell the home at an auction or foreclosure sale. Some lenders are amenable to negotiations to modify the mortgage, but many are not. Loan modifications can be helpful if they are approved but only a small percentage get approved. In our experience, loan modifications cause more foreclosures than they prevent due to the false sense of hope they give to people who are struggling and who might otherwise make their house payment. If you are trying to negotiate, you should be aware that mortgage lenders would prefer to make money through a mortgage payment rather than through foreclosure unless there is significant equity in the property.
If a lender won't negotiate with you, or if you are getting the “run-around,” it may be appropriate to file Chapter 13 bankruptcy so that you can stop the foreclosure process. You may lose your home if the foreclosure sale is complete before you file your Chapter 13 petition. Therefore, it is important to time your petition appropriately and seek help from a bankruptcy attorney as soon as you can after realizing foreclosure is possibility.
In order to stop the foreclosure, you must have the income necessary to remain current on your mortgage payments and cure any delinquencies in your back payments through your Chapter 13 debt repayment plan. Ultimately, if you cannot afford your home, a Chapter 13 will not help you keep it. If you are able to make all required payments through the course of your 3-5 year debt repayment plan, you can avoid foreclosure and keep your home.Curing the Arrearage
Your attorney can help you create a debt repayment plan that cures the arrearage, while still leaving you enough money to stay current on your mortgage. You will have to make a single monthly payment to the Chapter 13 Trustee. A portion of this will be distributed to your lender to satisfy any payments you failed to make on your mortgage.
When filing for Chapter 13 and trying to stop a foreclosure, you will need to submit paystubs, tax returns and other documents to show your monthly wages, income from rental properties, social security or child support. The trustee will also want to see the value of your home in the form of an appraisal and proof of insurance.
You must start making payments thirty days after your case is filed. If you miss a few monthly Chapter 13 plan payments or if you fall behind again on your house payment after filing a Chapter 13, a lender can ask the bankruptcy court for permission to foreclose on your home, even though you have filed Chapter 13. If this happens, you must bring current those mortgage payments you missed after filing for bankruptcy. Some lenders will give you six months to cure that arrearage or agree to a “Hoggle” order which adds your arrearage since your case was filed (and your creditor’s attorney fees and court costs) to your Chapter 13 payment plan.
It may also be possible to strip liens if you owe money on second or third mortgages that are greater than the value of your property. Contact an experienced Alabama bankruptcy lawyer at Grainger Legal Services. We understand the stress that a threatened foreclosure can trigger. We serve clients in South-Central Alabama from our offices located in Montgomery, Prattville, and Troy. Call us at (334) 260-0500 or contact us online to schedule a consultation.