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How Chapter 13 can be an effective tool to stop foreclosure

As this blog has discussed on previous occasions, a Chapter 13 bankruptcy works a bit differently than the more commonly used Chapter 7 in that it requires debtors to make and follow through on an approved monthly payment plan. The money from this repayment plan will go to pay all or part of the person's outstanding debts.

One advantage to a Chapter 13 over a Chapter 7, a Chattanooga family may want to consider is that Chapter 13 can be an effective tool to stop foreclosure, should the family be behind in its house payments. While a Chapter 7 can delay foreclosure via what is called the automatic stay, ultimately, a bank or lending institution can simply wait until a Chapter 7 is over and then proceed to take the family's home. The only option for the family is to attempt to negotiate with the bank, but the bank has no obligation to cut the family any kind of break.

Like a Chapter 7, a Chapter 13 bankruptcy will also afford a family under financial stress an automatic stay. That is, a court order preventing creditors from taken collection actions, including foreclosures, until the bankruptcy proceeding is over. But, unlike a Chapter 7, a family can then use its Chapter 13 plan not only to continue making its regular monthly house payments and to catch up on back payments.

At the end of a Chapter 13, a family can therefore potentially emerge from the bankruptcy caught up on its mortgage and thus in no danger of losing its house. While the general concept of this is relatively simple. Though, the details of successfully pulling off this debt relief strategy should be discussed with an experienced Tennessee bankruptcy attorney.

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-954-7180
Phone: 423-624-4002
Fax: 423-624-0509
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