Spalding Law Firm PLLC offers Chapter 13 Bankruptcy Services across Washington state.
Now that the economy is showing signs of what’s known as a “K-shaped” recovery, I want to address a concern homeowners are beginning to ask me: What do I do if I am facing an imminent foreclosure?
We are creating city-specific pages on what a homeowner facing a foreclosure sale can do.
The bankruptcy solution to foreclosure is Chapter 13 bankruptcy. Chapter 13 deals with the reorganization of debt, and is the easiest/safest way to keep your home in a foreclosure situation.
Chapter 7 is problematic here because any and all pre-petition debts are discharged. One common misconception is that secured debts are not discharge. Make no mistake, they are discharged, assuming you do not reaffirm them. Rather, what remains is the lien on the secured property. A valid lien lets a lender foreclose on real property, and take possession of other collateral (e.g. automobile and trailers). The result is that mortgage arrears are similarly discharged, which makes foreclosure a near certainty if you cannot cure the arrears during a Chapter 7 bankruptcy.
Chapter 13 isn’t problematic if you have steady income and can fund both your mortgage payment and a payment of arrears. If you have enough income to cure arrears within 5 years while also paying your other expenses, then Chapter 13 bankruptcy can probably solve the foreclosure problem.
But there is a conundrum here. If you weren’t able to pay the mortgage previously, how can you pay it now along with mortgage arrears? Generally speaking, it’s a matter of having been off-work due to illness or some other cause that creates the mortgage arrears.
Chapter 13 is also an option for people who are behind on car payments and want to keep their car and reorganize their debts. Sometimes people just are not eligible for Chapter 7, whether that is because of high income, a Chapter 7 bankruptcy discharge in the recent past, or significant arrears.
Where Chapter 13 can become difficult is when the person has an unsteady income or unsteady recent job history. After all, if your income fluctuates you might not be able to make Chapter 13 payments to the trustee. The Eastern District of Washington’s Chapter 13 office wants wage directives. This means that your payments to the Chapter 13 come directly out of your check. So if your checks are uneven and if there is reason to believe that you won’t be able to make the payments, plan confirmation becomes less certain.
So that’s it for now. If you think Chapter 13 bankruptcy could be a potential solution to your problems, go ahead and schedule a consultation. You can also call my cell number at 5 0 9 9 0 6 2 2 2 1.
