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Filing for Chapter 13 Bankruptcy after Denied Mortgage Modification

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For people who have been denied of their application for mortgage modification, there is another option. If they really don’t want to lose their home to foreclosure, then they have the choice to file for Chapter 13 bankruptcy. With Chapter 13, homeowners have the opportunities to postpone or stop foreclosure and pay their back debts on mortgages. Many people use the power of Chapter 13 to keep their house because it allows them to have enough time to be current on their payments.

As explained on Greenway Law, LLC, foreclosure is stopped by the protection from Chapter 13 bankruptcy. Upon filing of Chapter 13, the automatic stay order is immediately implemented. While the bankruptcy case is active, the lender is prohibited from collecting payment from you. Although Chapter 13 does not erase your mortgage debt, if it is part of your Chapter 13 repayment plan the lender can’t turn down your payments for previous missed payments. Regardless of current or future missed payments, the lender is also not allowed to take over the house.

Through the repayment plan from Chapter 13, you have the option of paying in full or portions of the debts and you have the chance of having the late and unpaid payments paid over the extent of the repayment plan. Factors such as your income and the time that you need to complete all the requirements can also affect your mortgage. You must also be able to pay for the current mortgage and other basic necessities while paying your mortgage arrearages with your current income. Foreclosure can be prevented if you are able to pay the needed payments throughout the repayment plan.

Another option aside from mortgage modification and filing for Chapter 13 bankruptcy is by negotiating with your lender. Bankruptcy does help in easing the payment plans and giving you enough time to save up for your mortgage, but it can affect your credit record for a significant amount of time. Weighing your options with a lawyer can greatly help in knowing which option to choose.

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