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Chapter 13 Bankruptcy

Even though you may have tried every option to keep your home, filing for Chapter 13 bankruptcy may give you the relief that you need. By filing for Chapter 13 bankruptcy, your goal will be to repay your debts to your creditors over the course of three to five years.

In order to file for Chapter 13 bankruptcy, however, you must have enough income to make your payments.

What is the process for filing Chapter 13 bankruptcy?

  • File a petition;
  • File a statement of financial affairs; and
  • File a list of all property, debts, income and expenses.

Once you have filed for Chapter 13 bankruptcy protection, you will:

  • Devise a payment plan to a trustee appointed by the court, who will make payments to your creditors.
  • Submit the payment plan to the court for approval.
  • Attend a meeting of the creditors where you will be questioned about your debts.
  • Attend credit counseling. You will have to participate in credit counseling before you file your bankruptcy petition. You also will need to participate in a debtor education class after you file. Both pre- and post- filing credit counseling classes can be done in person, online or via telephone.

If you are unable to make all of your payments, the trustee may modify your plan or the bankruptcy judge may grant a hardship discharge in which your debt will be dismissed due to your inability to make payments. After you have made all of your payments, you will be given a full discharge.

How does filing for Chapter 13 bankruptcy affect home ownership?

Filing for Chapter 13 ceases any pending foreclosure proceedings and organizes a plan for you to become current on your mortgage payments. Once you have filed for Chapter 13 bankruptcy and made all of your required payments, you should be able to keep your home.

If you have a second mortgage on your home, it may be discharged by the bankruptcy court. If your home only has enough equity to secure your first mortgage, the second mortgage will be deemed unsecured debt and if so, may not have to be repaid.

How does filing for Chapter 13 bankruptcy affect your credit?

A Chapter 13 bankruptcy will remain on your credit report for up to 10 years and can lower your score initially by 200-350 points. While the bankruptcy is pending, you will be unable to secure any credit without the permission of the bankruptcy court.