If a consumer falls behind on their mortgage payments, and the lender accelerates the loan and initiates foreclosure proceedings, a Chapter 13 bankruptcy (wage earner) is often the only realistic way to save the home from a foreclosure sale.
Unless the homeowner can pay all unpaid mortgage payments, late fees, legal fees and foreclosure costs prior to the foreclosure sale, the lender will often proceed with foreclosures while offering loan modification options under HAMP or other programs, which may or may not stop the foreclosure. Many consumers rely exclusively on loan modification programs until it is too late and they are facing a foreclosure sale.
One thing that is very important to remember is that unless the lender agrees to stop the foreclosure by entering into a loan modification, the law firm conducting the foreclosure will be proceeding. This causes a great deal of confusion. It is a good idea to know about Chapter 13 bankruptcy, which can be a viable alternative for many people, even if they wish to attempt a loan modification.
Chapter 13 bankruptcy is the only way to immediately stop a foreclosure process and require the mortgage holder to accept payments on the arrearages over a period of time. In addition to saving a consumer’s home, Chapter 13 provides other benefits of discharging unsecured debts (like medical bills or credit cards), resolving tax problems, and reducing the monthly payments owed on secured debt such as car notes and furniture notes.