Effects of Chapter 13 Bankruptcy on Foreclosure

Every year in the US, a lot of people lose their precious homes due to foreclosures and the cases are constantly on the rise. There are a number of reasons for the bankruptcy and foreclosures but the people who have to actually deal with the process are the only ones who can describe what it is like to leave their dear property. To understand the process of a foreclosure, it is important to first know what a foreclosure is and why does it happen.

What is foreclosure process and why does it happen?

A legal process in which an action is taken by the state authorities against an individual or a group when there is failure in making the specified payment on time on their mortgage and the lender has the right to take over the property to meet their payments regardless of the reason of the failure. The details of the process of foreclosure are specified in the Chapter 13 of Bankruptcy and the proceedings and notices, and the amount of time depends on the nature of the case. Foreclosure cases usually take 5 to 6 months for the finalization of the case. The action of foreclosure is a detailed one comprising of a number of orders, notices and hearings.

What is the Process of foreclosure in Florida?

This problem arises when the borrower isn't able to pay on time and it can be anything from the mortgage payment, insurance dues on the property or failure in paying property taxes. Short collection sales are followed by negotiations between the lender and the borrower and if the problem continues, the Notice of Default is issued which states all the details of the due payment with the late payment charges and other fines. After the Notice of Default has been sent to the borrower, the mortgage lender files the Lis Pendes or the paperwork in the court which specifies that the lender is going to sue the borrower at the failure of payments and the borrower is notified about the lawsuit terms.

Next comes the Notice of Action which is printed in the newspaper, which states that the mortgage holder has failed to pay the dues and is required to complete the payments on the date given on the current notice. This works as an official signal and begins the foreclosure action. It consists of the lawsuit aiming at evicting the borrower from the mortgaged property by posting the date and time of the auction that will be conducted to gain back the payment that were not completed.

After the lawsuit, and during the time of 3-4 weeks to auction the owner has an option to pay all the dues to the lender and can gain back the full ownership of the mortgaged property and all the auction proceedings will be halted. If the borrower still fails to pay the dues, the foreclosure reaches its last step, the Sheriff's sale where the final auction of the property takes place at the county courthouse and the highest bidder wins the property. At this point, the borrower loses all right to the property and the documents of the property are transferred in the name of the new owner's name. This completes the foreclosure process and the files, and formalities are completed.

How to avoid foreclosure?

Though it is almost unavoidable after the property has been taken over, the borrower can do a few things which would help him/ her in dealing with the banks and lawsuits. A good lawyer can be a very useful tool in dealing with the case of foreclosure and can also help the borrower in communicating with the mortgage lender. These are the specifications of the foreclosure under the chapter 13 and must be understood well to avoid bankruptcy and loss of property.

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How Chapter 13 Bankruptcy is Helpful?

Chapter 7 and Chapter 13 are two common chapters one can use to file for bankruptcy. In Chapter 13 bankruptcy you do not have to forgo your property in order to pay off the debt. Apart from not involving liquidation, there are several advantages of Chapter 13 bankruptcy that makes it a good choice for debtors. Chapter 13 is more complicated than Chapter 7 and one needs to be understand it well before opting for it.

Eligibility

Everyone cannot apply for Chapter 13 bankruptcy. The first criterion to be able to choose this chapter is that you have to prove to the court that you have a steady income which makes it possible to repay the loan. You will also need to prove that you can meet all your financial obligations such as alimony payment, child support etc before you use your income to repay debt. The second criterion is that if you have a high debt you cannot use Chapter 13 to repay the debt.

Duration of the Repayment Plan

Chapter 13 enables you to repay the loan over a long period of time which can take about 3-5 years. However, the duration of the repayment plan will depend upon your income and your debt amount. You can easily find out whether you will have to file for three-year duration or five-year duration simply by finding out whether your average monthly income in the six months prior to filing bankruptcy is more or less than the median income for your state. If it is more, you will have to propose a five-year plan and if it is less than the median income, you can ask for three years.

Restrictions To Be Observed

There are many things which make Chapter 13 different from Chapter 7 bankruptcy – one being that a debtor cannot incur more debt without the approval of the court. For example, a debtor under Chapter 13 cannot acquire a car loan.

Amount To Be Repaid Under Chapter 13

Chapter 13 makes it mandatory for you to repay some debts completely. The debts which need to be repaid in full are called priority debts and can include alimony, child support, tax obligations and wages you owe to employees. Your Chapter 13 bankruptcy plan must also maker provision for you to repay your secured debts (debts which gives creditors the right to own your property or car. While planning for Chapter 13 bankruptcy, you will also have to consider repayment of unsecured debts such as credit card or medical bill. You will have to use your disposable income for repaying the unsecured debts. However, you can repay these debts over a period of time and need not necessarily pay all at one go.

Trustee in Chapter 13

For filing a Chapter 13 you will need a direct point of contact that is also known as a trustee. The trustee will review the payment plan and has the power to question the authenticity of the plan in the court if he finds things to be improper. Once the court approves the plan, the trustee becomes the intermediary between the debtor, the court and the creditors. The main job of the trustee is to take the payment from the debtor and use it to repay the creditor. The debtor cannot directly pay the creditor.

Once you pay all your debts over the specified period of time, all your debts are discharged. You will receive an official discharge notification once you show to the court that you have been regularly paying your alimony and child support.

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