The moment you file a bankruptcy petition with the federal bankruptcy court all debt collection activity is stopped. This automatic stay prevents your lender from moving forward with foreclosure. It is important to know that during the Chapter 13 proceedings your lender will not discuss potential workout arrangements. Because you are making one cumulative fixed monthly payment, you may include entire car note(s) or small mortgage(s) (generally second or third mortgages) into your Chapter 13 plan.

If you are in foreclosure and considering a Chapter 13, timing is crucial as it relates to prospective tax consequences. Speak with a bankruptcy attorney for more details on when to file.

Generally, your delinquent payment total, including penalties, will be added up and you will be required to pay this sum to your lender over a pre-determined length of time. This payment is usually separate from your home loan payment and your Chapter 13 consolidation payment.

Under the typical plan, you make monthly payments to a court appointed bankruptcy trustee for generally three-to-five years. The amount of your monthly payment is determined by several factors, such as the amount of debt you have, your ability to repay and the extent that you have assets. The bankruptcy trustee distributes the money to your creditors.

NOTE: Bankruptcy will adversely affect your credit more than other options.

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The information contained in this report is deemed to be accurate but is not guaranteed.
Sources: "The Foreclosure Bible" and the California Association of Realtors®