Using Bankruptcy to Keep Your Home From Foreclosure.
Good afternoon everybody, Edward Kelly here with 188 Debtline, answering your bankruptcy questions. Today we’re going to talk about chapter 13 and specifically question I get a lot. I’m six months behind on my house. Can I stop the bank from taking it? Well the answer is yes with a few qualifications as always. So one of the main reasons that people file chapter thirteens other than just making too much money to file a seven because there aren’t income cutoffs, is to save their house. So as we all know, many people have terrible stories of losing their home and foreclosure. You know, once the bank gets going, it’s like a juggernaut not satisfied until it’s got your house back. Then auctions and offer nothing and charges you personally for the difference.
So chapter 13 is I think unarguably your best weapon to stop that. You can enter into state court fight a foreclosure that way, but you’re then at the mercy of the court, a federal bankruptcy law makes it a no brainer. Once a 13 is filed, something called the automatic stay goes into effect and the foreclosure and the state court proceeding has to stop immediately. So the only thing to keep in mind is once you stop the foreclosure juggernaut, when your chapter 13 you have got to make a monthly payment and you’ve got to be able to do it. So sadly, some people go into chapter 13s just to get that automatic stay, but they don’t have any means to make up the payment.
The way it works in the 13, especially in Oklahoma, it varies some in other districts. But here, if you file a 13 to stop a foreclosure, which of course means you’re behind to some extent on your house payment. You’re going to have to pay back all of that arrearage plus the interest, and you’re going to have to immediately make all of your current payments.
So let’s say you’re $10,000 behind. Now, chapter 13 can be anywhere from three to five years. If you would normally be able to do a seven but you’re only doing a 13 because you need to save your house, then you can do a three year plan. If you make too much money to do a seven you’re going to do a five year plan. So that’s if you would qualify for a seven, 36 months if you qualify, if you don’t qualify for a seven, 60 months, so that 10,000 you can just divide that. So over the course of 36 or 60 months, you’re going to have to pay back every bit of that. And you’re also in Oklahoma going to pay it through the trustee, your regular mortgage payment. So let’s say your arrearage payment is 75 bucks a month over the life of the plan and your mortgage is 800 so you’re going to pay eight 75 every month.
So if you don’t actually have the money to do that, as with anything else in life, if you don’t have the means, you’re just putting off the inevitable. However, and you know, I questioned clients very thoroughly to make sure that they are going to be able to succeed in a chapter 13 plan. I find that most people can find a way, this is the one thing that they most desperately need a pause and a break in the action and a chance not to be at the mercy of some voice at the other end of the phone who has no sympathy and no intention of helping them. They have the backing of the federal government in saying, you will cease collection. Here’s what you’re owed and here’s how we’re going to pay it. So we’ll deal more with how a chapter 13 works in a later video.
But you just remember if you’re behind on your house and you’ve got the money to over time, pay off the arrearage and if you’re able to make your normal house payment, 13 is the absolute best way to save your house. Okay, we’ll see you soon on 188 Debtline.