Homes are substantial investments. Most people have to spend years paying off their mortgages. The standard term for a mortgage is 30 years. At any point until a homeowner has paid their mortgage in full, they are theoretically at risk of losing the property.
Lenders limit their financial exposure when loaning money for home purchases by treating the property as collateral for the loan. The lender can foreclose and assume ownership of the property if the owner misses multiple payments. Those at risk of foreclosure might decide to file for bankruptcy to protect their home equity. Chapter 13 bankruptcy is a common option for those concerned about missed mortgage payments.
How can a Chapter 13 bankruptcy, in particular, protect people at risk of foreclosure?
Chapter 13 filings can facilitate modifications
The terms of a mortgage may make it difficult for borrowers to remain in compliance, especially if they have missed payments. In some cases, those concerned about losing their homes to foreclosure can request modifications from their lenders. They might be able to increase the repayment period, which may reduce their monthly payments.
In some cases, they may be able to lock in a lower interest rate. In some cases, homeowners may be able to move missed payments to the end of the repayment period. Such arrangements eliminate the need to come up with thousands of dollars to cover multiple missed payments all at once to bring the mortgage back into good standing.
Chapter 13 bankruptcy also helps people by providing an automatic stay that temporarily stops collection activity. Those who are able to discharge some of their debts may also have an easier time keeping their budgets balanced.
Reviewing mortgage paperwork and a history of missed payments with a skilled legal team can help people evaluate how likely they are to face foreclosure. A Chapter 13 bankruptcy is one of the most effective solutions for homeowners who have missed payments.