The Roseville real estate market can provide homeowners with substantial equity. However, substantial equity also gives banks added security in the event of foreclosure. Don’t let a few missed mortgage payments lead to the loss of your equity and family home. Clients facing foreclosure can use chapter 13 bankruptcy to stop foreclosure and save their home through a 5-year repayment plan.
About Chapter 13 Bankruptcy
There are critical differences between chapter 13 and chapter 7 bankruptcy. While chapter 7 bankruptcy is usually over in a few months, chapter 13 bankruptcy can last anywhere from 3 to 5 years. During the 3-5 year period, the petitioner will repay creditors partially or in full. As a product of that repayment, the client will become current on secured debts such as their home and cars. Accordingly, when clients emerge from chapter 13 bankruptcy they are no longer in default on secured debts and thereby safe from foreclosure and repossession.
After filing a bankruptcy petition federal law creates an automatic injunction against collection actions. This injunction is called the automatic stay as it “stays” creditor collection efforts. The intent of this prohibition against collection is to give the debtor breathing room, force creditors to participate in the bankruptcy, and protect the bankruptcy estate that is comprised of the petitioner’s property.
As applied to foreclosure, the filing of a chapter 13 bankruptcy petition creates the automatic stay which effectively stops a pending Trustee sale of the home. However, it cannot undo a past sale; the automatic stay can only prevent the continuation or initiation of collection actions like foreclosure.
No Longer In Default
Chapter 7 bankruptcy cannot save a house in foreclosure. Yes, the automatic stay will stop a pending foreclosure action, but the creditor will seek relief from the automatic stay in bankruptcy court as the petitioner will still be behind on their secured debt payment. In contrast, chapter 13 bankruptcy not only stops a pending foreclosure action, but it creates a repayment plan that is binding on the creditor. In essence, the petitioner will repay their delinquent mortgage payments over 5 years (60 monthly payments) while making their regular mortgage payments as they become due. At the conclusion of the repayment plan, the petitioner will be current on their mortgage, thereby preventing the bank from foreclosing on the home after bankruptcy.
How Much Does Chapter 13 Bankruptcy Cost?
Chapter 13 bankruptcy is more expensive than Chapter 7 bankruptcy. Whereas chapter 7 bankruptcy attorney fees can be as low as $900, chapter 13 bankruptcy attorney fees mostly align with the Bankruptcy Court’s Guidelines For Payment Of Attorneys’ Fees In Chapter 13 Cases. Accordingly, most attorneys charge $4,000 for non-business cases and $6,000 for business cases. However, most attorneys only collect a percentage of that fee before filing the case with the remainder payable through the chapter 13 repayment plan. Accordingly, it’s possible to pay the majority of your chapter 13 bankruptcy attorney fees in installments after your case is filed.