What Happens if I Can't Make My House Payments in Chapter 13 Bankruptcy?

By Heather Frances J.D.

Chapter 13 bankruptcy can give you a financial clean slate by erasing certain debts and giving you a chance to catch up on your payments. However, your mortgage is generally not one of the debts erased by bankruptcy. If you cannot stay current with all your house payments during your Chapter 13 bankruptcy, your lender can foreclose on your home.

Chapter 13 bankruptcy can give you a financial clean slate by erasing certain debts and giving you a chance to catch up on your payments. However, your mortgage is generally not one of the debts erased by bankruptcy. If you cannot stay current with all your house payments during your Chapter 13 bankruptcy, your lender can foreclose on your home.

Automatic Stay

As soon as you file for Chapter 13 bankruptcy, federal bankruptcy law immediately protects you with an “automatic stay.” This stay halts any collection efforts -- including litigation or foreclosure -- from all of your creditors. Since the stay is automatic, it applies to everyone who files, and the bankruptcy court simply issues an order to put the stay in place. Even if you are in the advanced stages of foreclosure and an auction date is set for your house to be sold, the automatic stay stops the proceedings.

Protect your loved ones by a legally binding will. Make a Will Online Now

Chapter 13 Bankruptcy

Chapter 13 bankruptcy restructures your debt under a repayment plan that typically last from three to five years. You submit a repayment plan to the court for approval, and it must include your mortgage arrears along with your other debts. During the life of your plan, you must pay your disposable income to a court-appointed bankruptcy trustee who will redistribute that money to your creditors as provided in your plan.

Staying Current

If you want to keep your house, you must stay current with the repayment plan in addition to paying your ongoing mortgage payments. If you miss payments on your repayment plan or don’t stay current with your ongoing mortgage payments, your lender can file a motion for relief with your bankruptcy court, asking the court to lift the automatic stay so the lender can foreclose on your home. The lender can file this motion at any time once you get behind on your repayment plan or ongoing payments.

Motion for Relief

If your mortgage lender files a motion for relief, you will have an opportunity to oppose the motion in a hearing before a bankruptcy court judge. If you don’t oppose your lender’s motion, the court likely will lift your stay so your lender can proceed with foreclosure. If you oppose the motion, the court might issue an "adequate protection order" to give you another chance to catch up on missed payments, or it may decide the issues at the hearing. An APO eliminates the need for a hearing by allowing the lender to proceed with foreclosure or other remedies -- but only if you do not get current on payments and fees.

Protect your loved ones by a legally binding will. Make a Will Online Now
Do You Have to Wait for Your House to Foreclose Before Filing Bankruptcy?

References

Related articles

Bankruptcy Laws Regarding Mortgage

Bankruptcy allows debtors to get some relief from a debt load they cannot otherwise overcome, but it doesn't always allow them to keep their assets. Mortgage lenders have rights even while the homeowner is going through bankruptcy. Depending on the type of bankruptcy a debtor files and how much equity he has in his home, he may lose his home during the bankruptcy process.

Does the Bankruptcy Court Allow You to Pay Outside the Chapter 13 Plan?

When you file a petition for bankruptcy protection, you are asking a federal court to protect you from creditors. The court issues an automatic stay of all collection actions, including lawsuits, and gives you time to reorganize your finances and prepare for a fresh start. In a Chapter 13 bankruptcy case, you set up a partial repayment schedule under the guidance of a court-appointed trustee, but you still may be able to handle some debts outside of the repayment plan.

What Happens if a Bank Discharges a Home Loan During a Bankruptcy?

At the end of a bankruptcy case, you will receive a bankruptcy discharge that relieves you of all financial obligations toward the debt. The discharge also applies to home mortgages. Depending on whether you file for Chapter 7 or Chapter 13 bankruptcy, and whether you are current on your monthly payments, you may have several options if you would like to keep your home.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

How Does an Automatic Stay Get Started in Bankruptcy?

When you file for bankruptcy, the court puts an injunction in place known as an automatic stay. You don't have to do ...

What Happens If You Include Your Home in Chapter 7?

When a homeowner files for Chapter 7 bankruptcy, what happens to the home depends on various factors, including how ...

Can You Save Your Home by Filing Chapter 13?

Chapter 13 bankruptcy protection, governed by the federal bankruptcy code, allows debtors with a steady income to ...

Bankruptcy & Child Support Arrears in New Jersey

Bankruptcy can help you get a fresh start financially by eliminating many of your debts or giving you a chance to catch ...

Browse by category