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Give your lender an eviction notice! File Chapter 13 bankruptcy

You want to keep your home, but your lender is knocking at your door threatening to evict you through foreclosure proceedings because you missed a few payments. More than likely, you attempted to work something out with your lender, but those efforts did not bear fruit.

How can filing for Chapter 13 help?

When you file bankruptcy, an automatic stay goes into effect that halts all collection efforts by all of your creditors, including your mortgage lender. The immediate danger to your home stops, but only temporarily. Your lender retains the right to request that the court lift the stay in order to allow the foreclosure proceedings to continue. Even so, your lender might agree to work with you once you file.

Under Chapter 13, the court requires you to file a repayment plan that includes all of your debts. The plan proposes a way to catch up on your missed payments and remain current with your mortgage payments as well. You need to be sure that your income meets this financial demand.

Be sure to list any second or third mortgage loans as well. If the value of your first mortgage loan is equal to or greater than the value of your home, the court can rule that other liens on your house can be changed from secured to unsecured debt. If you successfully complete your repayment plan, the obligation to repay those loans usually goes away, and you continue to live in your house as long as you remain current on your payments.

What happens to my other debts?

The court requires the inclusion of all your debts in the bankruptcy. Any you fail to include remain active and owed by you after the proceedings are complete. Unsecured debts, such as credit cards, often go away after completion of the repayment plan.

Do I get to keep my other assets?

In a Chapter 13 bankruptcy, you often get to keep all of your other assets, unlike a Chapter 7 in which the trustee sells non-exempt assets to pay your creditors. You should be careful, however, because failing to disclose your assets fully risks the dismissal of your case. If that happens, the foreclosure of your home proceeds unimpeded.

If this sounds like an option you want to explore, it would be beneficial to discuss your situation with an attorney. Gathering all relevant information, preparing the petition and your repayment plan, and meeting court deadlines all require adherence to the U.S. Bankruptcy Code and the rules of the court. Any misstep could cost you the discharge you desire and the ability to keep your home.

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