Saving Your Home from Foreclosure under Chapter 13 Bankruptcy

Chapter 13 bankruptcy is often used to save a person's home or investment property  from foreclosure. Under chapter 13, you are allowed to stop the mortgage foreclosure case and propose a plan to reorganize your mortage payments. The chapter 13 case though must be filed before the foreclosure sale.

Cure Mortgage Arrearages

One typical plan provides for the catching your past due mortgage payment. The chapter 13 plan usually involves paying off the mortgage arrearage over a 3 to 5 year period in addition to making your regular ongoing monthly mortgage payments.

The Bankruptcy Court's New Loss Mitigation Mediation Program

The Bankruptcy Court in Miami started a new mortgage mediation program on April 1, 2013. It has been very successful in other parts of Florida where the program was previously instituted several months ago. Under this program a mediator is appointed by the Bankruptcy Court to assist in the process and documents and communications are exhanged over a special internet portal.

Avoid Second Mortgage 

If your home has decreased in value, sometimes you are able to wipe out or "avoid" your second mortgage. For example, if you owe $300,000 on your first mortgage and $100,000 on your second mortgage and your home has gone down in value to $250,000, there is no equity or value to "secure" the second mortgage. Under these circumstances, the chapter 13 plan (and related section 506 motion) may provide to wipe out or avoid the second mortgage lien. The $100,000 debt owed on the second mortgage will be wholly unsecured and usually only receive a small dividend like the credit cards receive -- typically around five cents on the dollar.

A certified copy of the order avoiding the second mortgage may be recorded in the county public records to document that the second mortgage is void.