Foreclosure Can Be Avoided Through Bankruptcy
Foreclosure on a home mortgage in Kansas can be stopped through a Chapter 13 bankruptcy in most cases. Chapter 13 allows you to make up past due payments through a restructuring plan. It is also possible in some cases to remove second mortgages.
In many Chapter 13 bankruptcies mortgage lenders are paid directly by the borrower if they are current on the home mortgage at the time of filing. If you are behind on the home mortgage when you file and you are trying to keep your home the court will require that payments are made through the Chapter 13 plan; in this case, the trustee pays the lender with money from the plan.
If you file for Chapter 13 bankruptcy when a foreclosure proceeding has commenced but no sale has occurred, the bankruptcy’s automatic stay will stop the foreclosure. Staying current on your bankruptcy payments, and making up the arrears through your Chapter 13 plan prevents the lender from foreclosing on your property.
The Chapter 13 plan gives you three to five years to pay the mortgage arrears. They must be paid in full by the end of the repayment period.Second or third mortgages and home equity lines of credit (HELOC) might be stripped off of the house if there is no equity beyond the first mortgage. In that case they become part of your unsecured debt and are paid (often at a steep discount) through your Chapter 13 plan. At the end of the repayment period any remaining loan amounts on the stripped off mortgages are discharged completely. This is why many people facing foreclosure choose Chapter 13 over Chapter 7 bankruptcy.
Kansas is a judicial foreclosure state, which means your lender must go to state court to obtain a judgment against you in order to foreclose. At any time up until the sale of your home has occurred, you can file a bankruptcy to stop the sale of your property. Once the sale has occurred the lending company cannot be forced to accept repayment of your mortgage through the bankruptcy plan.To summarize:
- If you are in foreclosure when you file for Chapter 13 bankruptcy an automatic stay stops the foreclosure. If you stay current on your bankruptcy payments and make up the arrears through your Chapter 13 plan the lender cannot foreclose.
- If you are worried about foreclosure, you should consult with an attorney as soon as possible, and they can explain how filing a chapter 13 bankruptcy may help prevent the foreclosure. They can help you plan a budget to include the repayment plan under Chapter 13, including your basic house payment and the arrears that can be paid through the case.