Chapter 13 Bankruptcy Mortgage

The Chapter 13 bankruptcy on mortgage works when the Court places an automatic stay that places an injunction on the mortgage foreclosure. But, this decree from the court arises when it is assured of the income earning capacity of the debtor during the term extended. The subject filing for Chapter 13 bankruptcy mortgage has to present the source of income, and his Currently Monthly Income. Once he has submitted proof of his earning capabilities being sufficient to meet the current mortgage payments and living expenses, the court may place the order to stop foreclosure.

Under Chapter 13, all the outstanding dues are combined like the unsecured loans, outstanding mortgage, insurance, pending vehicle and student loans, credit card debts, etc. Typically, when a defaulter files for Chapter 13, an automatic stay makes its entry, preventing foreclosure.

The law expects the debtor to submit the proposed plan of repayment from his income for the settlement of the dues to the creditors. This is to be filed within 15 days of filing for Chapter 13.

When a petition is filed under this clause, the debtor has to resume with the payment of the mortgage amount as decided by the repayment plan. Any default in the repayment according to the defined amount can induce the Court to lift the automatic stay on foreclosure and resume the proceedings for the same. But, a prompt payment of the mortgage by the debtor can result in the payment of the outstanding amount within the time granted by the Court that may vary between three and five years.

It is always wiser for a debtor who had filed for bankruptcy to refrain from refinancing as it increases the load on your existing financial burden that can easily result in the foreclosure. So, an astute debtor might seek the services of a lawyer to understand the circumstances related to this clause for a better advantage.