- Chapter 13 bankruptcy can save a debtor's home.house image by Byron Moore from Fotolia.com
When a person purchases a home, his last thought would be that he would lose the home because of his inability to make his mortgage payments. If a Connecticut resident has defaulted on his home loan and wants to avoid foreclosure, he can file for bankruptcy. Both Chapter 7 and Chapter 13 bankruptcy will stop foreclosure proceedings for a time. Chapter 13 can stop the foreclosure process and put the debtor on the track to complete home ownership. - If a debtor has received a notice of default from his mortgage company, he can file for Chapter 13 bankruptcy to keep his house from being foreclosed. After the bankruptcy petition has been filed, an automatic stay will go into effect. The stay prevents the mortgage company from taking the debtor’s house (See Reference 2).
A bankruptcy trustee will be appointed to the debtor’s case. The trustee acts as an intermediary between the debtor and the creditor. In a Chapter 13 bankruptcy case, the debtor proposes a repayment plan to the bankruptcy court. The trustee can object to the plan on behalf of the creditors. The bankruptcy judge ultimately decides if he should approve the plan or send the debtor to come up with a new plan. The plan should last from three to five years. The means test determines the length of the repayment plan (See Reference 1 & 2). - The debtor takes the means test by comparing his family income to the median family income for a family of the same size in the state of Connecticut. If the debtor’s family income is less than the Connecticut state median, his repayment plan will last for three years. If the debtor’s family income is more than the Connecticut state median, his repayment plan will last for five years. (See Reference 1)
The Census Bureau listed Connecticut’s median incomes as of 2010 as $58,321 for a single earner; $72,328 for a family of two; $86,335 for a family of three; $101,761 for a family of four. Add $7,500 for each family member in excess of four (See Reference 3). - The debtor goes about keeping his house out of foreclosure by incorporating his missed mortgage payments into the repayment plan. The debtor has the full three or five years, whichever the length of his plan, to repay missed mortgage payments. The debtor will also have to make his regular mortgage payments in addition to the payments made under the plan. The debtor makes one monthly payment to the bankruptcy trustee each month and, in turn, the trustee distributes payments to the creditors. In order to complete the plan, have debts discharged and become current on the mortgage, the debtor must make all plan payments on time each month (See Reference 2).
Chapter 13
Means Test
Repayment Plan
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