Chapter 13 is a Home-Saver that can stop a Foreclosure and a Sheriff Sale
Here are five ways filing a Chapter 13 Bankruptcy in Indiana can save your home:
1. Chapter 13 allows you to catch up on your back mortgage payments, while protecting your home and providing you with a flexible repayment plan
You have the length of your Chapter 13 plan–anywhere from 3 to as long as 5 years—to pay back your delinquent mortgage payments at 0% interest. During this entire repayment period, you are protected from foreclosure as long as you follow the terms of the court-approved plan. If you do follow your plan, you will be current on your home when you finish your case.
2. “Strip off” junior or second mortgages
If your home is worth less than the amount you owe on your first mortgage, Chapter 13 Bankruptcy can possibly eliminate your second mortgage and “strip” it from your home. This means that you would no longer need to make the monthly second mortgage payments, thereby significantly reducing the monthly cost to keep your home. The stripped second mortgage debt is treated in your Chapter 13 case like a “general unsecured creditor,” meaning that the second mortgage balance is paid only as much as you can afford to pay. Whatever portion of that balance that is not paid during your case is written off at the end of it and there is no second mortgage against your home.
3. Prevent income tax liens from being recorded on your home
Both Chapter 7 and Chapter 13 prevent federal and other income tax liens from attaching to your home while the cases are open. But your protection in Chapter 7 only lasts a few months due to the shortness of Chapter 7. Thus, the Internal Revenue Service or the Indiana Department of Revenue would be able to place a lien against your home or auto just as soon as the Chapter 7 case is over, usually only about three months later. This gives the IRS or other taxing authorities additional leverage against you, and puts your house and other personal property in jeopardy.
Conversely, filing a Chapter 13 case before a tax lien is recorded means there won’t ever be such a lien against your home. Instead, the claim of the Indiana Department of Revenue or IRS would be paid off in your Chapter 13 case as a “priority creditor” while the IRS/state could not record a tax lien throughout the bankruptcy.
4. Satisfy IRS or Indiana Department of Revenue income tax liens, and clear them off your home title
If on the date you filed your Chapter 13 case, the Indiana Department of Revenue had already filed a tax warrant or the IRS had already filed a tax lien, both taxing authorities will be stayed or stopped from enforcing their liens during the chapter 13 bankruptcy plan. In the event that the tax obligation is one that must be paid back, the Chapter 13 plan will provide to pay the delinquent taxes over a period of 3 to 5 years. Chapter 13 bankruptcy provides you with the ability to pay these inescapable debts on a reasonable timetable and also protects you from the mean old tax man.
5. Slash other debt obligations
Chapter 13 reduces what you must pay on your other debt obligations. As a result, you would be freeing up more money to help you afford your mortgage obligations.
Chapter 13 can surprisingly give you more room in your budget to pay towards your home than if you had filed a Chapter 7 case. That’s because if you owe certain kinds of debts that would not be written off in a Chapter 7 case—such as an ongoing vehicle loan, certain taxes, child or spousal support arrears, and most student loans—Chapter 13 could allow you to pay less each month on those obligations and creating more monthly cash to be used for the home and everyday living expenses.
To learn more about how Chapter 13 Bankruptcy can help you, contact Indiana Bankruptcy attorney Brad A. Woolley for a free consultation.