How a Personal Bankruptcy Can Save Your Home in Kansas City

Many people don't know that during these tough economic times, filing for bankruptcy may not only release individuals from liability for most unsecured debts and prevent creditors from taking collection actions, but it can save your home from foreclosure as well. While Chapter 7 bankruptcy discharges your legal obligation to pay most unsecured debts, Chapter 13 bankruptcy allows repayment of past due debts over time, preventing creditors from repossessing secured property on which payments are being made.

Under the present laws, filing either a Chapter 7 or a Chapter 13 bankruptcy can stop a foreclosure, in order to allow the homeowner to cure the mortgage. An experienced Kansas City bankruptcy attorney can explain how, under the current law, bankruptcy can help save homes from foreclosure in a few ways.

Chapter 7 is a temporary stop to the foreclosure, but might give the individual or family a short time to cure the past due balance, sell or refinance the property. Chapter 13 will give the debtor up to five years to catch up on the missed payments, or a longer period to sell or refinance. Exactly how this would work must be looked at by a Kansas City bankruptcy lawyer on a case by case basis.

Most often, people in Kansas and Missouri who want to save their home will file Chapter 13 bankruptcy, as opposed to Chapter 7, to allow themselves time to cure the mortgage arrears. As soon as the individual files the chapter 13 petition, an automatic stay stops the foreclosure proceedings, as long as it is filed prior to the foreclosure sale, even if only hours before the sale time. The individual may then bring the past-due payments current over a reasonable period of time, while continuing to make the ongoing (regular) payments in addition to whatever Chapter 13 plan payment is required.

Chapter 13 enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. It allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 plan. Doing this may lower those payments, and free to debtor to make other payments, such as a mortgage payment.

There are several ways in which Chapter 13 offers individuals and families an opportunity to save their homes from foreclosure. By filing under Chapter 13, home owners can stop foreclosure proceedings and may cure delinquent mortgage payments over time, as long as they make all mortgage payments that come due during the chapter 13 plan on time.

In addition, Congress is currently looking at changing bankruptcy laws to allow mortgage modifications which would allow bankruptcy judges to oversee modification of residential home mortgages. If passed, the law might allow mortgage modification by changing interest rates, payments, times and lowering the balance due under the right conditions.