Can Chapter 13 Save My Home?
Dec. 6, 2021
Yes! A Chapter 13 can stop a foreclosure sale against your property. Each state has foreclosure rules which the lender must follow. Some states require that a lender engage in a judicial foreclosure proceeding, while others, including Missouri, often use the faster, streamlined process called a non-judicial foreclosure. Either way- filing a Chapter 13 bankruptcy does stop a foreclosure sale!
Non-Judicial Foreclosure & Deficiency Judgment
In Missouri, foreclosure is most commonly done through the non-judicial process. Missouri also permits a deficiency judgment following the foreclosure sale of your house, so you could still owe the remaining money on it.
Redemption of the Mortgage
If you can pay off the mortgage and costs (redemption) before the planned foreclosure sale, the lender must certify that you have done so. Of course, if you had enough ready cash to pay off your entire mortgage balance and the court costs, you probably would not have been foreclosed upon in the first place.
Short Sale or Deed in Lieu of Foreclosure
As noted above, you can enter into a short sale agreement with your lender. Likewise, you can talk to your lender about avoiding foreclosure by completing a deed in lieu. In this transaction, you voluntarily hand the collateral (your house) to the lender in exchange for a release from your mortgage obligations. Once again, you want to be sure your lender waives the right to any deficiency in the sale approval contract.
Impact of Chapter 13 Filing
You may be able to avoid all this – or at least get some breathing room – by filing for Chapter 13 bankruptcy. If your lender has sent you a foreclosure notice, you need to, first, check carefully for how much time you have before the sale. Then, if you file Chapter 13 within that time frame, the lender will not be able to hold the foreclosure sale without obtaining court approval.
Chapter 13 will also give you time to make payments on your mortgage to cure your default and save your home. The missed payments will be included as part of your Chapter 13 repayment plan. Under the plan, which can last as long as five years, you will continue to make your regular monthly mortgage payments and make payments on the arrearages to the bankruptcy trustee. Once you have caught up with all the required late payments, your mortgage is no longer in default.
Contact a St. Louis Bankruptcy Attorney Today
If you have received a foreclosure notice or think that one might be in your near future, you may want to consider whether Chapter 13 bankruptcy with foreclosure experience can help you keep your Missouri home. Contact us or call my cell phone at 314-740.2989 for a free initial evaluation of your options.