Can anyone file Chapter 13 bankruptcy to save a home from foreclosure?

If you are facing the prospect of your mortgage lending foreclosing on your home, one option available to you that will immediately stop foreclosure proceedings is to file for protection under Chapter 13 bankruptcy guidelines.

Chapter 13 allows for debt consolidation that includes all outstanding mortgage arrears, car loan arrears, outstanding credit cards balances, medical expenses. All of your debts, secured and unsecured, must be included in the filing. This process is not to be confused with a debt reduction or debt consolidation program.

The consolidated debt amount is not reduced, but it is interest free. The amount must be paid over a timeframe that generally ranges from 3 to 5 years. The consolidated amount for unsecured debt (credit cards, medical expenses, etc.) cannot exceed approximately $308,000. Secured debt (mortgages, vehicle loans, etc.) cannot exceed approximately $923,000.

Debt payments are made through the court system and not directly to the creditors. Filing for bankruptcy will stop mortgage foreclosure proceedings immediately and must be done prior to the lender starting these procedures. Filing will also stop unsecured creditors from continuing or starting collection procedures.

There are two primary qualifications to be met for filing for Chapter 13 protection.

First, you must be employed or have a consistent source of income. You must be able to verify this information to the court. Sources of income include wages, income from self employment, social security benefits and alimony and child support.

Second, you must have disposable income available beyond your basic monthly expenses that can be applied to the amount covered by the bankruptcy. If your basic monthly expenses exceed your monthly income, you have no disposable income to apply to the past due amounts and you will not qualify for this type of bankruptcy protection. You must be able to pay all your current monthly bills and have an amount left over to apply to the amount in arrears.

One advantage in using Chapter 13 to avoid home foreclosure is that while you must have adequate income to pay your past due mortgage amounts, you do not have to make one payment that covers the entire amount that is in arrearage.

If you are considering filing Chapter 13 bankruptcy to save your home from foreclosure, consider consulting a service company that specializes in stopping foreclosure. The process of filing can be complicated. There are deadlines to be met and requirements to be fulfilled. There are consequences to filing Chapter 13 bankruptcy. This type of company can assist you in navigating the legal requirements to save your home.