So there’s research showing that filing chapter 13 New York bankruptcy may reduce mortality rates and delay or prevent foreclosure. How exactly does it accomplish this, and how can it best be used to debtors’ advantages?
First of all, like other chapters, upon filing chapter 13 bankruptcy, a debtor is immediately protected by the automatic stay. This prevents lenders from foreclosing on a home if the mortgager is in default. It should be emphasized that consulting with an experienced New York bankruptcy lawyer before default occurs usually contributes to much more beneficial outcomes than waiting until it’s almost too late. That having been said, once the automatic stay is in place, debtors will be able to remain in their homes until the case is concluded, which can be up to five years.
Second, chapter 13 allows debtors to repay mortgage arrearages plus any interest that accrues on them. Debtors who fall behind in their mortgage payments can propose a repayment plan that includes back mortgage payments to get the full repayment on track.
Third, the repayment plan will prioritize secured creditors, which would definitely be the lender with the first lien on the property. Other debts, particularly debts owed to unsecured creditors like credit card debts, obligations for medical treatment, and even education debts, are given a lower priority. This means that instead of trying to pay off many creditors at the same time, the repayment plan can allow the debtor to focus on the secured debts while discharging any remaining unsecured debts after the plan is concluded.
Four, similarly, although it’s not unsecured, automobile debts can be “crammed down” to the value of the vehicle, which further reduces the debtor’s total obligation and frees income for mortgage payments.
Five, debtors who discharged underwater mortgages in chapter 7 can file a subsequent chapter 13 case just to strip the liens. (This tactic might not be necessary if the Supreme Court holds that lien-stripping is possible in chapter 7.)
Chapter 13 offers many benefits to homeowners, and if you are encountering financial difficulties but would like to keep your house, then talking to a bankruptcy lawyer sooner rather than later might open up more options or make the process easier in the long run (and the short run too).
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 Bankruptcy Lawyer Brooklyn NY Bruce Weiner for a free initial consultation.
