Chapter 13 is famous for two things. Saving Your Home and Being Complicated. Saving Your Home With a Chapter 13 Bankruptcy can be a very tedious process and here are some of the situations below.
In the short term, Chapter 13 can stop foreclosures and other creditor actions (much like a Chapter 7). However, unlike a Chapter 7 bankruptcy, Chapter 13 bankruptcy involves a plan of getting caught up with your creditor, namely your mortgage. The automatic stay that stops foreclosure is great but temporary. What is special about Chapter 13 is the long term plan that gives you the room you need to get back on track and keep your home.
Given the complication of Chapter 13 bankruptcy, it is really vital that you have not just an ordinary bankruptcy lawyer, but a really good bankruptcy lawyer who is experienced with Chapter 13 bankruptcy.
If you have had a hardship gotten behind on mortgage payments. Chapter 13 could be the solution for you. You want to keep your home but you need time to catch up with the unpaid back mortgage payments (called mortgage arrears). Sometimes the banks are so aggressive that they make it impossible for people who could otherwise afford their mortgage to stay. Chapter 13 bankruptcy is for these situations.
Lets say your monthly mortgage payment is $3,000 and you are six months behind on payments ($18,000). Your bank is giving you some impossible catch-up plan where you have to pay $5,000 per month for nine months. You can’t afford it. Chapter 13 is your solution. So long as you can afford the chapter 13 plan payments, you can pay your regular mortgage and pay the $18,000 arrears over a FIVE YEAR PERIOD. That means you pay your mortgage and you pay an extra $300 per month in a chapter 13 plan. You can get caught up and keep your home.
Now imagine you also have $30,000 in credit card debt, but you can only afford to pay $300 per month in your plan. You might ALSO be able to totally eliminate your credit card debt in addition to saving your home!
Get Rid Of Your Second Mortgage
Another way Chapter 13 bankruptcy is great is that it sometimes enables you to strip (remove) a second mortgage. This is very complicated and again requires a real expert.
Stripping your second mortgage requires a separate motion with the court. A motion is the legal term for a written legal request. Different courts have different ways of describing and organizing the process of getting rid of a second mortgage. Also there are a lot of complicated steps. Not everyone can do this.
The basic process is as follows:
File Chapter 13 bankruptcy
File a motion or other ‘request’ for a hearing with a judge
The hearing with the judge is where you will explain to the judge why she should remove the second mortgage from your house.
Make sure to give proper notice to the creditor
Attend the hearing with the judge and argue your case
Prepare and submit the order to be signed by the judge. The order is the judge’s demand that the second mortgage company remove its claim from your home and that the mortgage company forever goes away.
Generally speaking, you cannot remove a second mortgage if your house has equity. You can only remove the second mortgage if the first mortgage is equal to or greater than the full value of the house. AND, depending on your state, your second mortgage might have to impair an exemption before it can be removed.
Schedule a Free Consultation with Your Tacoma Bankruptcy Attorney
When it comes time to file for bankruptcy, you need a compassionate and skilled attorney who will be able to guide you through the process as cleanly as possible. Northwest Debt Relief Law Firm, we can help you with filing for Chapter 7, Chapter 11, and Chapter 13 bankruptcy in Washington State. We will be there every step of the way to help navigate you through the often-complex and difficult bankruptcy process.
Give us a call at (253) 780-8008 to schedule a free consultation with one of our bankruptcy attorneys. If you have any other questions about bankruptcy, one of our attorneys will be more than happy to offer advice on your particular situation.