Every year millions of Americans enter into a variety of debt consolidations. As the popularity of debt consolidation has increased, so has the number of dangerous pitfalls in these debt consolidation programs.  Chapter 13 Bankruptcies are a type of debt consolidation allowing you to reorganize your finances by consolidating your debts into one monthly payment. Chapter 13, however, should not be confused with traditional debt consolidation programs.  Chapter 13 has the power of the Federal Bankruptcy Court behind it, and provides many advantages for people seeking debt relief.

-Brian P. Hayes

This is the third section of our look at living through foreclosure. In this segment we will consider the use of a Chapter 13 Bankruptcy filing to stop foreclosure.

While many readers may realize that bankruptcy laws changed in October, 2005, what they may not realize is the negligible effect of the law changes on most debtors. Using a Chapter 13 filing to stop a foreclosure can have several beneficial aspects. First, a Chapter 13 filing immediately terminates the advancement of the foreclosure proceeding. Under §362 of the Bankruptcy Code an “automatic stay” is imposed which prohibits the lender (and almost all other creditors) from attempting to collect on debts. By stopping the foreclosure early in the process, a Chapter 13 can save the home, and perhaps decrease the foreclosure costs (attorney fees, etc.) incurred by the bank and then passed on to the borrower. Unlike a forbearance agreement, a Chapter 13 filing can protect the home without the cooperation of the lender. Finally, repaying the arrearage on the mortgage in a Chapter 13 will normally give the homeowner between 3 to 5 years. This breaks the arrearage in the smaller pieces, as opposed to the larger lump sums often required in reaffirmation agreements.

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This is the second edition of our look at living through foreclosure. In this segment we will consider negotiating with the homeowner’s lender as a means to stopping a foreclosure. Lenders are in the “lending business,” and seldom wish to venture into acquiring real estate (that is, completing foreclosures) if avoidable. Occasionally a “forbearance agreement” will be offered which will allow the arrearage on the mortgage and foreclosure costs to be re-paid to the lender. After completion of the forebearance agreement terms, normal monthly payments can resume.

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