13 Feb How Chapter 13 Bankruptcy Can Stop Foreclosure in Brooklyn
Foreclosure can be scary for any homeowner. It often starts when you fall behind on your mortgage payments. You might receive letters from your lender, and you may feel stressed about losing your home.
Fortunately, there is a powerful legal option that can help you catch up on missed payments and stop the foreclosure process: Chapter 13 bankruptcy. In Brooklyn, this bankruptcy tool can offer you a second chance to save your property.
Why Is Foreclosure a Common Concern in Brooklyn?
High living costs in Brooklyn can sometimes lead homeowners into financial trouble. It could be medical bills, job loss, or unexpected home repairs.
When these bills pile up, it’s easy to fall behind on mortgage payments. In many cases, the lender will send notices and eventually start the foreclosure process.
If you do not take action, you might face losing your home. Brooklyn homeowners facing foreclosure often wonder if they have any choices beyond simply giving up. This is where Chapter 13 bankruptcy becomes a valuable tool. By reorganizing your debts, you can get your finances back on track without immediately losing your house.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is often called a “wage earner’s plan.” It allows people with a steady income to catch up on their debts over a three-to-five-year period. During this time, you make regular payments to a trustee, who then pays your creditors. Unlike Chapter 7 bankruptcy—where some assets may be sold to pay your debts—Chapter 13 focuses on reorganizing your debts into manageable monthly payments.
For homeowners in Brooklyn, Chapter 13 can be especially helpful when it comes to mortgage arrears. If you qualify, you may be able to include your missed mortgage payments in your repayment plan. This means you get more time to become current on your mortgage and keep your home. Throughout this process, a Brooklyn foreclosure defense lawyer can guide you step by step, ensuring you understand every option available to you.
How Does Chapter 13 Bankruptcy Protect Your Home?
The biggest advantage of Chapter 13 bankruptcy is the protection it gives you through the automatic stay. Once you file your petition, the automatic stay goes into effect and stops or “stays” most collection actions. This includes foreclosure. Even if your lender had already scheduled a foreclosure sale date, the automatic stay typically forces them to pause the process.
By pausing foreclosure, Chapter 13 gives you the breathing room you need to catch up on missed payments. Chapter 13 bankruptcy allows a debtor to enter into a repayment plan so that you can repay your mortgage payments in arears, as well as escrows (real estate taxes and insurance). You still have to make your normal monthly mortgage payments going forward, but the bulk of your past-due amount can be rolled into the repayment plan. This plan is usually designed to last three to five years, which can give you enough time to bring your mortgage current and prevent the loss of your home.
Who Qualifies for Chapter 13 Bankruptcy in Brooklyn?
Not everyone can file for Chapter 13 bankruptcy. Here are a few key requirements:
- Steady Income: You must show the court that you have a regular source of income so you can make monthly payments (consisting of the mortgage arears and your regular mortgage payments) to the bankruptcy trustee.
- Debt Limits: Your debts must be under certain limits set by federal law. These limits can change over time, so it’s important to check the most current figures.
- Credit Counseling: Before filing, you generally need to complete an approved credit counseling course within 180 days of submitting your bankruptcy petition.
- Honesty and Accuracy: You must list all your debts and assets truthfully. If you hide information or fail to disclose important details, your case could be dismissed.
Meeting these qualifications does not automatically guarantee that Chapter 13 is right for you. A detailed review of your finances is needed to ensure you can stick to the repayment plan. If your monthly expenses are already too high, you might find it difficult to make your regular mortgage payments plus the extra amount for the arrears in your plan.
What Happens If You Miss a Payment During Chapter 13?
Once your Chapter 13 repayment plan is approved, it becomes your roadmap for the next three to five years. During this time, you must make your plan payments on time each month. You also need to continue paying your regular mortgage amount if it’s not included in your plan. Missing payments can jeopardize the benefits of Chapter 13.
If you miss a payment, your trustee—or, in some cases, your lender—can ask the court to lift the automatic stay or dismiss your case. If the court agrees, the lender might continue the foreclosure process. However, there are sometimes ways to adjust your plan if you face a temporary hardship, such as a job loss or unexpected medical bills. Speaking with your attorney at Poltielov & Habib as soon as you see trouble coming is the best way to stay on track and protect your home.
How Does Chapter 13 Differ from Chapter 7?
When people think of bankruptcy, they often think of Chapter 7. This type of bankruptcy can wipe out (discharge) many unsecured debts, like credit card debt or medical bills, without requiring a repayment plan. However, Chapter 7 does not usually allow you to catch up on missed mortgage payments and keep your home unless you can find another way to pay those arrears or the lender agrees to a certain arrangement (like a loan modification).
In contrast, Chapter 13 is designed to help those who have fallen behind but still have enough income to repay at least a portion of their debts over time. This is why Chapter 13 is more likely to protect your home from foreclosure in Brooklyn. You can think of Chapter 7 as a quick path to debt relief, but Chapter 13 is often the better route when saving your home is the main goal.
What Is the Timeline for Chapter 13 in Brooklyn?
The Chapter 13 process in Brooklyn often starts with an initial consultation with a lawyer. You will discuss your income, debts, and goals. Next, you gather financial documents like pay stubs, mortgage statements and tax returns. Your attorney will use these to draft a bankruptcy petition, which is filed with the court.
After filing, the automatic stay goes into effect, halting most collection activity. About a month later, you attend a meeting of creditors. The trustee and any creditors who choose to appear will ask questions about your finances. If the plan is confirmed by the court, you begin making monthly payments to the trustee. As long as you meet these payments and follow the plan, you will remain under the protection of the bankruptcy court for the entire three-to-five-year plan period.
Ready to Explore Chapter 13? Here’s Your Next Step
Foreclosure can feel overwhelming, but Chapter 13 bankruptcy offers a legal way to slow things down and give yourself a chance to catch up. By filing for Chapter 13, you gain the protection of the automatic stay, which stops your lender from continuing with foreclosure. You then work through a structured repayment plan, giving you valuable time to pay off arrears and keep your home.
The key to making Chapter 13 work for you is to have the right legal support. Poltielov & Habib, LLP located at 118-21 Queens Boulevard, Suite 603, Forest Hills, New York 11375, helps people in Brooklyn and beyond to find real solutions to their financial struggles.
To learn more, call (718) 520-0085 or contact us online to set up a consultation today. Let a skilled Brooklyn foreclosure defense attorney guide you through Chapter 13 bankruptcy so you can protect your home, reduce stress, and move toward a more secure future.