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Can Chapter 13 Bankruptcy Be Your Shield Against Foreclosure Threats?

If you are facing foreclosure, you are not alone. Since 2020, millions of Americans have been struggling to make ends meet, let alone keep the property they need. The good news is, there is a way to stop the foreclosure process, restructure your debt into manageable payments, and end the harassment you face from creditors.

Chapter 13 bankruptcy in New York involves creating a comprehensive repayment plan that lets you pay back a percent of your unsecured debt and wipe away the remaining unsecured debt, while giving you time to pay back (interest free) your mortgage arrears. It allows you to make monthly payments over a 3 to 5 year period, so the rest of your life isn’t as affected by your financial situation. By creating a repayment plan that you can afford, you not only create a better future for yourself and your family, you also halt the foreclosure process. This lets you catch up on missed mortgage payments while you continue to make the current payments, so you never fall behind again.

At Grady BK, PLLC, we’ve helped countless New Yorkers just like you find the financial security they need to climb out of debt and plan a better future. We understand that Chapter 13 bankruptcy can seem intimidating, so we’ve put together this guide that will answer your questions about foreclosure and help you learn the ways to prevent it. If you’re facing foreclosure in New York State, you are not alone. If you are overwhelmed by debt, call the New York bankruptcy attorney known for her support and compassion. Call Grady BK, PLLC.

How Does Chapter 13 Bankruptcy Work?

Chapter 13 bankruptcy is often called the “wage earner’s plan.” It allows people with overwhelming debt and regular income to repay all or part of their debts over a 3 to 5 year period. The goal is to make sure the person can afford their daily living costs, like housing and food, while also paying off their debts. The court assigns a trustee to oversee the case, who collects the payments and distributes the money to the creditors according to the plan. This way, the person doesn’t have to deal directly with creditors during the repayment period.

Chapter 13 can be helpful because it gives you a chance to catch up on missed mortgage payments without the pressure of dealing directly with creditors. If you follow the plan and make all the payments, the rest of your remaining unsecured debts are wiped away. So you and your family can have a fresh financial start, free of the money troubles that once overwhelmed you.

Chapter 13 Bankruptcy and Preventing Foreclosure

If you are facing foreclosure, Chapter 13 bankruptcy can be your defense against it. When you file for Chapter 13, an automatic stay is immediately put into place. This is a legal order that stops creditors from pursuing collection activities, including the foreclosure process. It can give homeowners the breathing room they need to catch up on overdue payments by sticking to their repayment plan.

The Benefits of Chapter 13 Bankruptcy

The most significant benefit of Chapter 13 bankruptcy for many people is its ability to stop foreclosure and allow homeowners to keep their homes. It also consolidates your unsecured debts into a single monthly payment, which can make managing future finances more straightforward. In certain situations, Chapter 13 bankruptcy can even give you the opportunity to avoid judgment liens on your home.

Chapter 13 Bankruptcy Limitations and Considerations

It’s important to remember that Chapter 13 bankruptcy isn’t right for everyone. It requires a stable income because the repayment plan is based on your ability to pay. Also, not all debts can be discharged under Chapter 13. Your student loans, alimony payments, and child support obligations usually remain untouched.

It’s also important to consider the impact on your credit score because filing for bankruptcy can have long-term consequences. A Chapter 13 bankruptcy will stay on your credit report for seven years, but you’ll be given training and guidance on how to rebuild your credit score. Most people can typically improve their score in about 12 to 18 months after bankruptcy. You will begin to rebuild your credit while you are still in the bankruptcy, so when the bankruptcy is over you will have already rebuilt your credit and be debt free.

Frequently Asked Questions about Chapter 13 Bankruptcy

Can filing for Chapter 13 bankruptcy stop a foreclosure once it’s started?

Yes, filing for Chapter 13 bankruptcy can stop a foreclosure at any point before the sale of the home is finalized. The automatic stay halts the foreclosure process and gives you time to catch up on missed payments.

How long does the Chapter 13 process take?

The filing process generally takes 95 days from filing the petition to approving the repayment plan. You are protected as soon as the bankruptcy is filed. The repayment plan itself usually lasts between three to five years, depending on your income and amount of debt.

Will I have to pay back all my debts under Chapter 13?

Not usually. While secured debts (like a mortgage or car) are paid their monthly payment (you continue to pay them directly), unsecured debts (like credit card debt, personal loans, medical, etcl) are usually only paid a percent of what they are owed and the rest of the debt is wiped away at the end of the bankruptcy.

Can Chapter 13 bankruptcy remove a second mortgage?

In some cases, Chapter 13 can “lien strip” a second mortgage if the home’s value is less than the balance on the first mortgage. This process converts the second mortgage into unsecured debt, which is wiped away at the end of the bankruptcy.

What happens if I can’t keep up with my Chapter 13 repayment plan?

If you’re unable to keep up with payments under your Chapter 13 repayment plan due to a significant change in circumstances, you might be able to modify the plan, convert your case to a Chapter 7 bankruptcy, or in some cases, receive a discharge due to financial hardship.

Call Grady BK, PLLC Today

If you are facing foreclosure in Central NY or the North Country, you need a bankruptcy attorney with experience and compassion. At Grady BK, PLLC, we can guide you through the process and find a plan that works for you.

Millions of Americans today suffer from overwhelming debt and financial difficulties, but they don’t need to suffer alone. Our bankruptcy attorney, Jessica Grady, can put you on the path to financial freedom and help you keep the possessions that matter most.

Call our office today at (315) 299-9005, and let’s stop the foreclosure process before it’s too late.