Like many Americans, you may be taking advantage of current mortgage forbearance protections. Unfortunately, once your forbearance period is over, you may have to begin making payments again, including repaying delinquent amounts.
Restarting monthly mortgage payments may not be realistic, especially if you also have other types of debt. However, if you still have a reliable source of income, you may be able to avoid foreclosure by filing for Chapter 13 bankruptcy.
What is Chapter 13?
Under a Chapter 13 bankruptcy, you may be able to arrange a new payment plan for your debt so that monthly amounts are affordable, rather than overwhelming.
Additionally, you may be able to reduce or eliminate some types of unsecured debt, such as a credit card balance or medical bills, making it easier to afford mortgage amounts and avoid foreclosure.
Chapter 13 and bankruptcy myths
Many Americans assume that personal bankruptcy is the beginning of the end. If you are struggling with debt, you may worry that bankruptcy will mean a ruined credit score and no chance of getting future loans. For these reasons and others, only a small fraction of U.S. households who may benefit from Chapter 7 or Chapter 13 choose to file.
However, while filing impacts your credit score initially, you may have a better chance of rebuilding credit after bankruptcy than you would by continuing to fall behind on important payments. Additionally, by getting your finances back on track, you may qualify for a new home loan within a few years of filing.