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Chapter 13 bankruptcy and the family home

The home is typically one of the most prized possessions of a Kentucky family. For this reason, when financial problems come into play, many begin to fear that they will lose their homes. Unfortunately, this will be the case for some; however, with a Chapter 13 bankruptcy, it is possible for most families to keep their homes.

Once an individual files for bankruptcy, an automatic stay is put in place and all creditors are prevented from attempting collections. At this point, a bankruptcy trustee is established and a three or five year payment plan is submitted to the court for approval. The actual length of time is determined based upon the total amount of debt that an individual has and the disposable income that is available.

Mortgages are generally secured debts. This means that in order for the individual to be able to keep the home, the mortgage must be paid. Any amount that is in arrears plus fees will need to be paid in addition to the regular monthly payment. During the repayment time period, the automatic stay is in force and the mortgage company may not initiate foreclosure proceedings without the permission of the court. If the borrower fails to make payments, it is possible for the bankruptcy court to lift the automatic stay.

Chapter 13 bankruptcy allows the individual to restructure debt so that it is more manageable. Generally, once the repayment period ends, remaining unsecured debts that have not been reaffirmed are discharged. Since the home is typically an item that the individual wants to retain and a mortgage is usually secured, this debt generally remains if the individual keeps the home. An experienced attorney can help the Kentucky family decide which options are best in the given situation.

Source: homeguides.sfgate.com, "What Do Mortgage Companies Do With Chapter 13 Bankruptcy?", Accessed on Feb. 18, 2017

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