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Mortgages and chapter 13 bankruptcy

When a South Carolina resident files for bankruptcy, an automatic stay goes into effect that prevents creditors, including mortgage holders, from continuing any collection activity as long as the stay is in effect. When the debtor chooses to file chapter 13 bankruptcy, he or she will work out a debt repayment plan that will last between three and five years.

In a chapter 13 bankruptcy, the debtor may stretch out his or her mortgage delinquency, catching it up over the life of the three-to-five-year plan. He or she will still be required to make his or her monthly mortgage payments. In this way, the debtor may be able to prevent his or her home from going to foreclosure. If a home is already in foreclosure but has not been auctioned at the time the petition is filed, the process will be halted so that the debtor can try to catch up the payments.

If the home has a second mortgage lien on it, the second mortgage will sometimes be converted to an unsecured debt, especially if the debtor is upside down or has little equity in the home. The second mortgage will then be paid at a fraction each month, and any remaining debt owed on it is discharged at the conclusion of the plan. If a person fails to make his or her payments during the repayment period, the trustee may either dismiss the petition or convert the case into a different chapter. At that point, the mortgage lender can take action, including foreclosure.

Chapter 13 bankruptcy can be a viable option for people who have significant debt and who are delinquent in their mortgage payments. This type of bankruptcy can help save a person's home from going into foreclosure. A bankruptcy attorney may be able to help explain the options people have to overcome debt.

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The Huggins Law Firm, PA

Columbia Office
1812 Lincoln Street
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Columbia, SC 29201

Phone: 803-764-1558
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