In Chapter 13 bankruptcy, a filer works with the bankruptcy court to create an affordable debt repayment plan. Under this repayment plan, filers pay off debts, including mortgage debts, to their creditors over a course of three to five years.
That, in a nutshell, is how Chapter 13 helps eliminate debt. Here's how Chapter 13 could help stop home foreclosure:
- Automatic stay. Immediately after a person files for Chapter 13, the automatic stay kicks into action. This court order usually temporarily halts foreclosure actions that have been initiated against a filer's home.
- Payment plan. Under the Chapter 13 payment plan, a filer can usually stretch out overdue mortgage payments in a more reasonable payment schedule. This may also allow filers to keep their homes.
- Discharged debts. Once mortgage payments are completely current through the repayment plan, some unsecured debts may be discharged at the end of the process, allowing a person to free up money to continue making regular mortgage payments, rather than pay other debts.
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