ABC reports there were 2.9 million American homes that went through foreclosure in 2010 - an increase of over 20 percent from 2008. However, these numbers should not be surprising.
During the last several years, Americans have dealt with one of the worst economic situations in nearly a century. Employers have cut jobs and reduced benefits, more people have relied upon credit for everyday items, and retirement accounts gradually eroded away.
The result has been that lending institutions have initiated foreclosure proceedings at an alarming rate with people unable to keep up with their mortgage payments. Fortunately, there remains at least one potential solution, Chapter 13 bankruptcy.
Eligibility for Chapter 13 Bankruptcy
The United States Bankruptcy Code provides that any individual who owes less than $360,475 to unsecured creditors and less than $1,081,400 to secured creditors, may file Chapter 13. However, meeting the debt requirements does not ensure a case will be successful.
Unlike Chapter 7 bankruptcy, where an individual pays nothing to unsecured creditors except in rare situations where assets are actually liquidated, Chapter 13 establishes a three to five year repayment plan. Therefore, any person wishing to file for Chapter 13 must show the court that they will be able to resume making monthly mortgage payments and cure any arrears over the five year plan. As long as a debtor complies with the plan, the case will succeed.
Benefits of Chapter 13 Bankruptcy
The filing of a bankruptcy case creates what is known as an automatic stay. That stops all collection efforts, including sheriff's sales. So, even if a judgment in foreclosure has been entered and a sale scheduled, bankruptcy will, at a minimum, postpone the sale. Creditors cannot call you, write you or commence or proceed with litigation.
Without Chapter 13, the mortgage company can demand whatever repayment term they want, if any. Usually, the best repayment term offered is 6 months. That is often impossible for most Debtors. Chapter 13 allows repayment over five years in monthly payments to an individual known as the Standing Chapter 13 Trustee. At the end of a successful case, the mortgage company must drop the foreclosure case and the mortgage will then be considered reinstated, as if the arrears had been paid all at once.
Anyone who has difficulty making their mortgage payments, or believes they may qualify for Chapter 13 should speak with an experienced bankruptcy attorney immediately to discuss their eligibility and options.
