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Halting foreclosure through Chapter 13 bankruptcy

Homeowners in Texas who are both overwhelmed by unmanageable debt levels as well as the specter of foreclosure may be unaware that filing Chapter 13 bankruptcy can both provide relief from their debt as well as halt the foreclosure of their home. Unlike the liquidation under Chapter 7, Chapter 13 bankruptcy provides a vehicle through which filers may take control of their delinquencies and save their homes.

Chapter 13 involves the creation and approval of a repayment plan for the filer's secured and unsecured debts, including and delinquencies. Through the repayment plan, debtors may stretch out repayment of the mortgage delinquency owed over a period of three to five years, as established by the trustee of thebankruptcy estate.

During the repayment period, the mortgage lender may not continue with foreclosure proceedings. As long as the debtor makes payments as ordered, the repayment can allow them to get back on track and halt foreclosure. Upon filing of the petition, further collection activities will be halted. When the debtor completes the repayment schedule, any remaining unsecured debt will be discharged, and the debtor will be able to continue with the mortgage payment schedule. Trustees may convert second mortgages into unsecured debts under certain circumstances, removing the property liens held by those lenders. This means that any amount remaining at the end of a repayment plan owed to the second lien holder will be discharged.

While choosing to file bankruptcy may be a difficult decision for most people, the potential relief afforded by it may outweigh the negatives of doing so. The possibility of saving a person's home from foreclosure is often a significant impetus in choosing to file a Chapter 13 bankruptcy petition. A bankruptcy attorney can provide assistance throughout the process.

Source:, "What Do Mortgage Companies Do With Chapter 13 Bankruptcy?", M.C. Postins, accessed on Jan. 11, 2015

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