Can a Chapter 13 Bankruptcy Delay Foreclosure and Save My Home?

E.J. Simonsen | Jan 14, 2022

If your home is in foreclosure and you’re worried about losing it, you may have heard that Chapter 13 bankruptcy could help you save it. Let’s take a closer look at the facts behind Chapter 13 bankruptcy in Texas to see whether it's the best option for someone facing foreclosure and whether it can protect your home from foreclosure or not.

Can Chapter 13 Bankruptcy Delay Foreclosure?

Yes, filing for Chapter 13 bankruptcy will temporarily delay a foreclosure due to the “automatic stay” provision. The automatic stay is a legal type of injunction that ceases all collection actions by creditors, with certain exceptions, and gives you a short break from payments and persistent collection communication. 

However, the key words here are “temporarily” and “short.” The automatic stay will not completely stop the foreclosure, but rather pause it and give you a little breathing room until a repayment plan is created and approved by the court. It’s also important to know that the automatic stay can’t reverse any parts of the foreclosure that have already been completed, and it can’t protect you from the consequences of missing mortgage payments in the future repayment period. 

Can Chapter 13 Bankruptcy Help Me Keep My House?

Yes, Chapter 13 bankruptcy can help you keep your house — but there are some important things to know before jumping into the process. 

Chapter 13 bankruptcy is frequently referred to as the “wage earner’s plan.” In short, this means it’s a good option for those who are in debt but have a dependable income. Unlike Chapter 7 bankruptcy, which requires you to sell off your assets to settle debt. Chapter 13 bankruptcy allows you to propose a repayment plan for your mortgage and other debts — as long as you’re able to get up to speed on your payments and then continue making them according to the newly approved schedule. 

In most Chapter 13 cases, the repayment plan is around three to five years, but it can vary based on your income level. If you’re able to make all monthly mortgage payments within that time period, your Chapter 13 bankruptcy could end with you maintaining homeownership. 

What If I Have Multiple Mortgages on My Home?

If you have multiple mortgages on your home, a Chapter 13 bankruptcy could help you reorganize that debt. In some cases, an experienced bankruptcy and foreclosure attorney may be about to reorganize your debt in a way that essentially strips other mortgages from your payments and recategorizes them as unsecured debt. Under Chapter 13 bankruptcy, unsecured debt takes last priority, and sometimes doesn’t need to be paid back at all. 

This process can bring your mortgage payments down to something more manageable — and if you can afford the amount of your new payments, you may be able to keep your beloved home. 

How Do I Know if Chapter 13 Bankruptcy Is the Best Option to Stop My Foreclosure?

Everyone’s financial situation is different. What might work best for some families may not work the same for yours. Before you jump into the process on your own, it’s always best to speak with an experienced bankruptcy and foreclosure attorney. They can offer a free consultation to assess your situation, then make recommendations for what your best move forward may be. 

Facing foreclosure and struggling to determine the best course of action? It's important to know you have options. For advice specific to you and your home, contact The Lane Law Firm. Our experienced bankruptcy and foreclosure attorneys are happy to help guide your decision and walk you through the process. 

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