Falling behind on your mortgage payments can be overwhelming and frightening, especially when foreclosure becomes a possibility. Many homeowners worry that filing for bankruptcy means automatically losing their house. However, certain bankruptcy laws are designed to help individuals reorganize debts and maintain their property. If you’re wondering whether you can keep your home after filing for Chapter 13 bankruptcy, continue reading and consult with a knowledgeable Montgomery County bankruptcy lawyer today.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, frequently referred to as a “wage earner’s plan” or reorganization bankruptcy, is designed for individuals with a regular source of income who are looking to restructure their financial obligations. Unlike other forms of bankruptcy that may involve the liquidation of assets, Chapter 13 allows debtors to reorganize their affairs and pay off all or a portion of their debts through a court-supervised process. This chapter is especially relevant for those whose income exceeds certain thresholds or for individuals who wish to protect specific assets from being sold to pay off creditors.
The main element of the Chapter 13 process is the development of a repayment plan, which typically spans a period of three to five years. Debtors must submit this plan to the court for approval, outlining how they will use their future income to satisfy their creditors. Once the plan is confirmed, the debtor makes fixed monthly payments to a court-appointed bankruptcy trustee. The trustee plays an important role by collecting these payments and distributing the funds to various creditors according to the prioritized terms of the plan. Throughout this period, an automatic stay remains in effect, which prohibits creditors from pursuing most collection activities or harassment. Upon the successful completion of all payments under the repayment plan, any remaining eligible unsecured debts are generally discharged, giving the individual a fresh financial start.
Can I Keep My Home if I File for Chapter 13 Bankruptcy in PA?
Yes, Chapter 13 bankruptcy is often one of the most powerful tools available for homeowners in Pennsylvania to save their homes from foreclosure. When you file, an “automatic stay” immediately goes into effect, which forces creditors, including your mortgage lender, to halt all collection efforts and stop the foreclosure process.
The main thing that allows you to keep your house is the Chapter 13 repayment plan. This plan gives you an opportunity to catch up on all the mortgage payments you missed over the three-to-five-year life of the plan. While curing the arrears through the plan, you must also resume making your regular monthly mortgage payments as they become due. As long as you comply with the terms of the confirmed plan and make all required payments, your home is protected from foreclosure. This restructuring process allows you to maintain ownership and address the default without liquidating the property.
For more information and legal advice, reach out to a skilled attorney today.
