Preferred Realty

Posted onFebruary 16, 2012 - 7:44 am by Admin | 0 Comments

According to a recent year end report from RealtyTrac, there were approximately 2.8 million foreclosure filings in 2009, with filings in 2010 projected to hit the three million mark. Despite the implementation of federal loan modification and refinancing programs, many homeowners are continuing to struggle with their unmanageable mortgage debt. For those homeowners who do not qualify for federal aid or for whom a short sale is not an option, there is one potential way to avoid foreclosure in the form of Chapter 13 bankruptcy.

How Chapter 13 Bankruptcy Works

Under Chapter 13 bankruptcy, debtors commit to repaying their outstanding debts under a court-approved repayment plan over a period of three to five years. To qualify for a Chapter 13 filing, petitioners must provide the court with a list of their assets and liabilities, proof of income, and a proposed plan for debt repayment, which must be approved by the individual's creditors and the court. Chapter 13 bankruptcy is often a preferable option for those individuals who are struggling to manage their debts but whose income or assets disqualify them from filing for Chapter 7 bankruptcy.

Chapter 13 Bankruptcy and Mortgage Debt

For homeowners who are potentially facing foreclosure, Chapter 13 bankruptcy is beneficial in several ways. First, upon filing the bankruptcy petition, an automatic stay is granted that prevents creditors from pursuing collection actions against the debtor, including foreclosure proceedings. The exception to this rule is if a homeowner has already been served with a foreclosure notice. If notice has been served, the lender may ask the court to vacate the stay and allow the sale to proceed.


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