September 15, 2015
 
If you are faced with a foreclosure, or even if you are just behind on your mortgage with no feasible way to become current, chapter 13 may be an option to keep your home and to cure your mortgage arrears over time.  Chapter 13 bankruptcy provides you an opportunity to catch up your mortgage arrears over the length of the chapter 13 process.  The length of the chapter 13 process depends on a number of factors, including your household income, family size, and other debts.  In general, when you file a chapter 13, you file a “Plan” that provides the manner in which you will pay back your various creditors.  When you use chapter 13 to stop a foreclosure, part of the bankruptcy Plan will be to pay back the mortgage arrears over time, while also paying your ongoing monthly mortgage payment, in order to ensure you are able to remain current on your mortgage payment while the bankruptcy is pending.  If you are able to make all of the required payments established by the Chapter 13 Plan, you will be able to avoid foreclosure and keep your home.
 
Second Mortgage – Lien Strip
 
Chapter 13 bankruptcy can also sometimes be used to eliminate second mortgage debt and payments.  In chapter 13, if you owe more on your first mortgage than your home is worth, you may not have equity to secure a second mortgage or other junior leinholders.  In this scenario, you can often use Chapter 13 bankruptcy to “strip off” the second (or third) mortgage debts and treat those amounts as general unsecured debt.  In chapter 13, general unsecured debt takes a back seat to all of your other primary debts, and often receives a significantly reduced percentage of their claimed amount owed, and sometimes are not paid at all.  If you are able to successfully complete a chapter 13 Plan and lien strip a second mortgage, you will be able to clear the second mortgage obligation from your home.  If you are looking at the option of using chapter 13 bankruptcy to stop a foreclosure, this might be one of the additional benefits of the process.

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