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Should I Keep Making Mortgage Payments During a Chapter 13 Bankruptcy?

Posted on in Chapter 13 Bankruptcy

Lake County foreclosure defense attorneysFor most people, it is not very hard to imagine a scenario in which they cannot afford to pay all of their bills. Maybe it starts with a missed auto loan payment or a monthly credit card payment, but all too quickly, a person is so far behind that it catching everything up might be impossible—especially catching everything up at the same time. In many cases like this, the person’s best option may be to file for Chapter 13 bankruptcy.

If your mortgage is one of the obligations on which you have fallen behind, you probably realize that your lender may soon have the right to foreclose on your home. In fact, depending on the circumstances, you might have already received notice that foreclosure proceedings have begun. Once foreclosure proceedings begin, you might be inclined to simply stop paying your mortgage, but if you have filed Chapter 13 bankruptcy, doing so could cause you more problems than it solves—especially if you hope to keep your home.

Automatic Stay in Bankruptcy

When you file for protection under Chapter 13 of the United States Bankruptcy Code, the court will automatically issue a stay on all debt collection activities—including efforts by your lender to collect your delinquent payments. The automatic stay also stops foreclosure proceedings. Your lender, however, can request permission from the court to continue the foreclosure. The court has the discretion to grant the lender’s request, but certain circumstances will make the court more likely to approve allowing the foreclosure to continue.

The Court’s Decision

In Chapter 13 bankruptcy, the end goal is to develop a workable repayment plan for most of your large debts, which will generally include your mortgage. If your Chapter 13 bankruptcy is successful, you will be back on track financially without losing your home, your business, or other assets that are important to you.

From a practical perspective, you will need to show in your initial bankruptcy filing that you have a repayment plan in mind that is reasonable and that will satisfy your major debts. If your plan seems like it was hastily thrown together or that it does a realistic chance of working, the court is more likely to allow your lender to continue foreclosure proceedings. By doing so, the court is recognizing that you will probably end up losing your home anyway.

This is where your continuing mortgage payments come in to play. If you stopped paying your mortgage the moment you received your default notice, each missed payment represents additional money added to the arrears on your loan. On the other hand, continuing to pay your mortgage shows good faith on your part and a serious intention of setting things right, not to mention slowly but surely increasing your equity in the home. If the court sees you attempting to avoid falling further behind, there is a much better chance that the lender’s request to continue foreclosure proceedings will be denied.

Call a Libertyville Foreclosure Defense Attorney

If you have received a foreclosure notice and you are considering filing for Chapter 13 bankruptcy protection, we can help. Call 847-549-0000 to schedule a free consultation with an experienced Lake County bankruptcy and foreclosure lawyer at Newland & Newland, L.L.P. today. We will work with you in finding ways to keep your home and to improve your long-term financial future.

 

Sources:

https://www.creditkarma.com/advice/i/chapter-13-bankruptcy-foreclosure/

https://www.thebalance.com/removing-bankruptcy-automatic-stay-316181

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