For many homeowners, foreclosure is a worst-case financial scenario, potentially resulting in the loss of their most valuable asset. Moreover, most lenders will not allow you to make up missed payments, requiring distressed borrowers to pay their entire past-due balance at once. Fortunately, filing for bankruptcy may help you save the home and bring the mortgage payments current with a court-managed repayment plan. If you’re in a similar predicament, here’s how pursuing a chapter 13 may prevent foreclosure.

The Automatic Stay

If the bank has already initiated foreclosure proceedings, filing for bankruptcy will put an immediate stop to the process while you work on restructuring your finances. The automatic stay requires all the creditors to stop their collections activity, including wage garnishments, repossessions, lawsuits, and foreclosure.

The Chapter 13 Repayment Plan

Along with your chapter 13 bankruptcy petition, you will also propose a repayment plan through which you can catch up on secured debt, such as mortgages and auto loans. Most repayment plans last between three to five years, and you must have sufficient income to keep up with the current debts while making monthly bankruptcy payments.

As long as you are current on bankruptcy, the mortgage lender cannot proceed with foreclosure. However, if you fall behind, they may petition the court to have the bankruptcy dismissed, after which they may begin collections activities again. Once the payment plan is completed, you’ll be current on all secured debts, while most unsecured accounts will be eliminated.

If you’re considering filing for bankruptcy, the attorneys at Greene Law, P.C., in Farmington, CT, will support you from the initial filing until the end of the case. Drawing on their in-depth understanding of the bankruptcy code, they’ll help you reclaim your life from debt. To schedule a free consultation, visit their website or call (860) 676-1336, and follow the law firm on Facebook for more news and legal tips.