How Can Chapter 13 Bankruptcy Help You Catch Up on Mortgage Payments in PA?

Suppose you have fallen behind on mortgage payments and the bank is demanding that you clear your arrears. If you don’t have money but want to stay in your house, you may be wondering what to do. If this is your situation, Chapter 13 bankruptcy could be what you need to save your home. Chapter 13 bankruptcy offers protections for Pennsylvania homeowners that can help them catch up on missed mortgage payments while avoiding foreclosure and keeping their homes. Unlike Chapter 7 bankruptcy, which may require liquidating assets, Chapter 13 is designed to help people reorganize their debts and repay what they owe over time, without losing their home. Our Lehighton & Carbon County bankruptcy attorney explains in more detail.

The Automatic Stay: Offers Immediate Protection From Collection Efforts and Foreclosure

The first key protection that Chapter 13 bankruptcy offers is the automatic stay. This protection is also offered under Chapter 7 bankruptcy. In Pennsylvania, the automatic stay, which goes into effect immediately when you file your bankruptcy case, stops lenders from continuing to pursue payments, proceeding with foreclosure, or scheduling a sale of your home. This means that if, for example, your lender is about to auction your house, the sale is paused. Even if a foreclosure or sale is only days away, filing for Chapter 13 bankruptcy can immediately halt the proceedings.

The automatic stay is a critical protection in Pennsylvania, where the foreclosure process is judicial in nature. This means that in PA, foreclosure proceedings must proceed through and under the court’s supervision. If a lender has obtained a judgment at the end of the foreclosure, a Sheriff’s sale is scheduled to auction the property and satisfy the debt. Once a Sheriff’s sale happens, you typically lose all rights to your property. This is why you must file your bankruptcy case as soon as possible.

Reorganization of Debts: Allows You To Catch Up on Payments Over Time

The second key protection that Chapter 13 bankruptcy offers is the ability to create a repayment plan spanning over 3 to 5 years. This means you can pay your regular monthly mortgage payments plus past-due mortgage payments, called arrears, slowly over 3 to 5 years without losing your home. According to the U.S. bankruptcy Code, if your current monthly income is below the state median for a family the size of yours, your commitment period must be three years. On the other hand, if your monthly income is higher than that of a family of similar size, you will pay over five years.

Suppose you are $15,000 behind on your mortgage and your repayment plan is for 5 years (60 months). In such a case, you would pay $250 monthly to cover your arrears plus your regular mortgage payment. As long as you are consistent with payments, your lender is prohibited from resuming foreclosure. At the end of the payment period, you’ll have caught up on mortgage payments with your lender.

Chapter 13 Bankruptcy Can Help You Manage Other Debts

Chapter 13 bankruptcy can help you manage other debts, such as medical bills, credit cards, and personal loans. You can partially repay these unsecured debts and discharge the remaining debts at the end of your repayment plan. Chapter 13 bankruptcy can help you gain long-term financial stability.

Contact a Pennsylvania Bankruptcy Attorney Today

If you have questions or are ready to file a Chapter 13 bankruptcy in Pennsylvania, contact our skilled Lehighton & Carbon County bankruptcy attorney, Adam R. Weaver, Esq., today.

Source:

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