The last thing any homeowner wants to happen is foreclosure. The fears associated with this process are even worse if your spouse and children live with you in your home. That said, there are many people who have delayed and prevented their foreclosure proceedings through a strategic bankruptcy filing. Chapter 13 bankruptcy may be particularly useful to homeowners in this regard as it's a way to restructure your debt, giving you some breathing room and making it affordable to get back on financial track again.
Chapter 13 bankruptcy allows you to create a repayment plan for your debts that are past due. As a part of your debt payoff plan, the bankruptcy court will require you to submit a monthly payment to satisfy your debts. As long as a Chapter 13 filer stays on track with his or her bankruptcy plan payments and completes them – which will take approximately three to five years – the filer will be able to avoid foreclosure and keep his or her home.
Chapter 13 may also be useful in getting rid of second and third mortgages in certain circumstances. These mortgages might be categorized as unsecured debts under bankruptcy laws, and the secured debt will take priority. If the unsecured debts are left unpaid by the time your Chapter 13 payoff plan concludes, then the debts will be dissolved.
If you're facing a home foreclosure process, bankruptcy could be just the solution you need to save your home. However, not everyone can benefit from this process to prevent foreclosure so it's important that you fully understand both the benefits and limitations of bankruptcy before taking action.
Source: Findlaw, "Facing Foreclosure? How Bankruptcy Can Help," accessed March 09, 2018