4 Ways Chapter 13 Bankruptcy Can Help Homeowners Chapter 13 bankruptcy offers homeowners several options when it comes to dealing with foreclosure , a mortgage default or even a second or third mortgage. Chapter 13 is known for helping homeowners obtain affordable mortgage payments that allow them to keep their homes.  The following options give more details on how struggling homeowners can utilize Chapter 13 to help them maintain their home:

  1. Filing Chapter 13 can save your home while repaying debts.  The filing allows homeowners to restructure debt obligations including their mortgage; payments can be made during the duration of 3 to 5 years.  Late or missed mortgage payments are cured while current mortgage payments are made.
  2. Chapter 13 can eliminate second and third mortgages.  This may be an option if you don’t have equity with your first mortgage to cover your second or third.  If your home has dropped in value there may not be enough equity to secure the value of the later mortgages.  The court may decide to strip the later mortgages and redefine them as an unsecured debt, which has less priority in a Chapter 13 case.
  3. Delay or stop foreclosure proceedings.  Chapter 13 can halt actions related to foreclosure with the automatic stay that goes into effect when you file.  The mortgage lender cannot enforce collection actions against you if your repayment plan includes provisions for curing your mortgage (when approved by the court).
  4. Mortgage modification may be granted.  Certain mortgages may get modified by the court, especially if the mortgage amount is greater than the value of the property.  Also known as a mortgage cram down, there are exceptions to this option.  If you have property such as a farm, multiunit building or mobile home, this option may help you retain it.


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