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Preventing foreclosure with a Chapter 13 bankruptcy

Homeowners in Kentucky and around the country may fall behind on their mortgage payments due to a layoff, Illness or other unforeseen setback. While the holders of revolving debt like credit card balances may sometimes be willing to negotiate when it seems clear that their alternatives are either litigation or writing the debt off, mortgage holders have a secured interest and can pursue foreclosure when debtors fail to make their payments as agreed.

Receiving a foreclosure notice in the mail can be a traumatic experience for property owners, and they often feel like they have been caught in an inescapable trap when mortgage arrears and penalties add up to thousands of dollars. One of the great myths surrounding bankruptcy is that the assets of debtors are liquidated to raise funds for their creditors, but a Chapter 13 personal bankruptcy filing may actually help property owners in foreclosure to stay in their homes.

While debt like a mortgage cannot be discharged in a Chapter 13 bankruptcy if the debtor concerned wishes to keep the secured asset, the three to five year payment plans entered into by Chapter 13 petitioners may allow them to catch up on their payments and take care of arrears over time. These plans may also make their mortgage payments more affordable by reducing or eliminating some of their other financial obligations.

Attorneys with debt relief experience will likely be very familiar with most of the myths surrounding personal bankruptcy, and they may address these misconceptions by explaining the differences between bankruptcy and options like debt settlement or credit counseling. While a bankruptcy filing may not be appropriate in every situation, taking this path does put an end to harassment from creditors and offers the possibility of a financial fresh start.

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