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Is Chapter 13 a suitable way to stop foreclosure?

Washington homeowners who face difficult financial circumstances might have been unable to maintain their mortgage payments. As soon as three installments have gone unpaid, lenders may start taking action, and homeowners may be under the impression that there are no remedies that would stop foreclosure. However, foreclosure can be prevented by filing for Chapter 13 bankruptcy.

Chapter 13 bankruptcy, which involves a court-approved plan for repayment of debts, will offer a homeowner the opportunity to maintain ownership of the home and stop any foreclosure proceedings. As soon as a person files for personal bankruptcy, an automatic stay becomes effective that will allow the homeowner time to negotiate a new agreement with the mortgage holder. The lender may expect late payments and interest to form part of the payment plan.

An extended period from three to five years will be allowed for the reorganized payment plan, and one of the conditions of such negotiations is the ability of the debtor to pay the newly agreed amounts promptly every month. If an individual has second or third mortgages on the property, the court-appointed trustee may convert them to unsecured debts which are dischargeable in bankruptcy. This may ease the debt load and enable the homeowner to maintain mortgage payments as agreed.

Chapter 13 bankruptcy can provide light at the end of the tunnel, but it may not be a suitable solution for all homeowners. Before taking such action, a consultation with an experienced Washington bankruptcy attorney may be the most appropriate first step to take. A lawyer can assess the circumstances related to the finances of the client and explain the pros and cons of filing for bankruptcy. He or she can provide guidance throughout the proceedings that will follow. However, if there is a more suitable remedy under the unique circumstances of the client, the attorney can recommend the best way to move forward and stop foreclosure.

Source:, "Will Bankruptcy Prevent Foreclosure?", M.C. Postins, July 27, 2016

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