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Can filing for Chapter 13 save your home from foreclosure?

Owning a home is a source of pride for many in Texas. Our homes are where we rest our heads at night, where we raise our families and where we celebrate holidays and other special occasions. In the end, "be it ever so humble, there's no place like home."

This is why, when homeowners in Texas fall on hard financial times, and are unable to keep up with their mortgage payments, the threat of foreclosure causes them significant stress. The thought of losing one's home is unbearable, but when a homeowner cannot pay their mortgage for a few months or more, their lender may pursue foreclosure. Through foreclosure, the creditor retakes possession of the home, and sells it at a public auction. Then the proceeds from the sale are used to pay back the mortgage.

A homeowner may try to negotiate an alternative to foreclosure, but when these negotiations fail, they may feel like they are out of options. However, there is an option that can stall foreclosure, giving them time to either catch up on their missed mortgage payments: filing for Chapter 13 bankruptcy.

Once a person files for Chapter 13 bankruptcy, an "automatic stay" will be issued. This means that any foreclosure proceedings are postponed until the end of the bankruptcy process. If a person has filed for Chapter 13 bankruptcy, this gives them the opportunity to establish a plan for paying back missed mortgage payments, along with current mortgage payments, over a period of time. In this manner, they may be able to keep their home.

Keep in mind that there are two ways creditors can get around an automatic stay. One is if they move the court to "lift" the stay. If the court approves this motion, foreclosure proceedings can continue. Also, if a homeowner is given advance notice that their home is being foreclosed upon, an automatic stay will not prevent foreclosure proceedings from continuing.

Despite these exceptions, filing for Chapter 13 bankruptcy may save homeowners from foreclosure, allowing them the chance they need to catch up on their missed payments in a manageable way. And, once the Chapter 13 repayment plan is complete, debtors are able to move forward with a fresh financial start.

Source: FindLaw, "Facing Foreclosure? How Bankruptcy Can Help," Accessed July 31, 2017

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