For many Tennessee residents, what was a reasonable mortgage amount in 2019 is more than you can handle today. Bankruptcy may look like your best option if you struggle with too much debt every month, but you worry about losing your home and how you and your family can live. The type of bankruptcy you file depends on your unique situation. It may not only offer debt relief but also stop foreclosure and save your home.
According to the U.S. Courts, a bankruptcy discharge releases you from liability for certain debts. Once discharged (wiped out), you no longer have responsibility for making those payments and creditors cannot take collection action.
Chapter 13
The Automatic Stay is an integral part of your bankruptcy case. It stops all collection activity, including the foreclosure process and prohibits debt collectors from sending emails, letters or making calls regarding overdue payments. This gives you time to work with the court-assigned trustee and determine your next steps.
Chapter 7 involves liquidating non-exempt assets, paying creditors a negotiated amount. The court then discharges most of the remaining debt. However, chapter 13 lets you catch up on debt requirements through a repayment plan. This plan typically includes making monthly payments for three to five years.
Mortgage modification
Although chapter 13 allows you to make missed mortgage payments, it does not address the current amount due each month. A mortgage modification can reduce the interest rate, which lowers your monthly payment. This arrangement also might allow you to add the missed payments to the end of the loan. The length of the loan increases, but the amount due each month is lower. The result is that your mortgage becomes current when the modification goes into effect.
Chapter 13 bankruptcy can protect your home from foreclosure, even if the lender already started the process. Understanding your legal options can help you keep your home and address the rest of your finances so that you can move forward debt-free.