Foreclosure proceedings can be stopped instantly by filing for Chapter 13 bankruptcy, the home saver, but there are the following dangers, including losing your home to con artists as well as to your creditors.
The nightmare of foreclosure is the dark side of the American Dream. The recent past provided people who had long been shut out of home ownership the opportunity to fulfill that dream. It was done through a combination of rising home prices, low mortgage rates and fancy financing know as subprime. Everyone wanted to be invited to the party and the subprime lenders made sure that as many as possible were included.
In my previous article, To Avoid Foreclosure, I discussed all of the standard ways recommended by HUD, mortgage lenders and financial advisors, on how to stop or avoid foreclosure. This article explores stopping foreclosure by filing for Chapter 13 bankruptcy.
Bankruptcy - BEWARE - Possible Hazards Ahead
This sure-fire method of stopping foreclosure dead in its tracks is being touted far and wide as the way people near or over the edge of foreclosure can stop foreclosure quickly. The stopping foreclosure part quickly is true. What is not being told to people in this desperate situation is that stopping foreclosure by declaring bankruptcy may save only a fraction of the equity in their homes or worse.
The worse is that scam artists are using the come on of stopping foreclosure by filing for bankruptcy to steal the equity.
Here is how they do it:
These scammers convince homeowners who are in trouble to file for Chapter 13 bankruptcy. They tell the homeowner that this filing is only for stopping the foreclosure proceeding. This is the nugget of truth in the mine that has been salted with false hope.
Then the scammers convince the homeowner to sign over the home to them and rent it back, "until they can get back on their feet."
This is the danger zone, because if the homeowner has not been able to make their payments to the mortgage lender, how are they going to be able to make the rent payments to the scammer?
"Magically" the house ends up being owned by the scammer and the homeowner, who thought he was in trouble before, now has been thrown into a deeper hole.
Stopping foreclosure by declaring bankruptcy can be legitimate. Chapter 13, really called the wage earner's plan is nicknamed "the home saver," because filing for it stops foreclosure proceedings and allows the homeowner to stay in her or his home.
Here is how Chapter 13 works to stop foreclosure:
A working person who has unsecured debts of less than $307,675 and secured debts less than $922,975, is eligible to file for relief.
The filing, in the Bankruptcy Court where the filer resides, has to include information about income and expenditures as well as assets and debts. This information has to be detailed and supported with tax returns. The filer also has to file a certificate showing he or she has received credit counseling. There are fees totaling $274.00 for filing which can be paid in four installments.
As soon as the petition is filed, the foreclosure proceeding is automatically stayed. This is not stopping foreclosure forever. It only stays the foreclosure, allowing a "reasonable" time for the homeowner to bring his or her past-due payments current.
Then there are meetings in court and the filer has to provide a payment plan. This plan must provide for full repayment of the debts over a period of three or five years. (If the filer's income is below his/her state median, the period is three years. If it is above the state median income, then the five year period applies.)
Stopping foreclosure by filing for Chapter 13 bankruptcy can save your home if you are working and can make all of your payments according to the "plan." If you fall behind, however, the foreclosure will probably be restarted.
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