Foreclosure on homes often happens when lenders want to retrieve the remaining balance of a loan from the homeowner who has stopped making payments. Normally, the lenders will not begin the legal process until the homeowner skipped out on 3 or 4 months worth of payments. Keep in mind, the foreclosure process varies in each state. In Texas, foreclosures only take place on the first Tuesday of the month. In addition, the creditor must provide certain notices informing you of the sale prior to any foreclosure date. Although there are loss mitigation options available through some lenders, Chapter 13 Bankruptcy also provides an option to delay or prevent foreclosure while providing an avenue for you to catch up on the mortgage arrears.
Chapter 13 is often called “Reorganization Bankruptcy” because it allows you to reorganize your debts and prepare a payment plan. If your home is being foreclosed, then you can file for Chapter 13 and extend your repayment length. Typical Chapter 13 cases range from 36 to 60 months and arrange monthly payments to your priority, secured, and in certain situations, unsecured creditors. For many, Chapter 13 provides a beneficial option for people to catch up on the arrears by including the arrears in the Plan and spreading the amount out over five years. While in Chapter 13, all payments must be made on time, including the regular on-going mortgage payments if they are not part of the Bankruptcy Plan. When the debtor completes all plan payments, the arrears on the mortgage will be cured and the debtor will exit the bankruptcy current on their mortgage.