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If a home owner falls behind in mortgage payments, the lender initiates the foreclosure process. The foreclosure usually begins three to four months after the first payment is missed. The total time it takes for the lender to foreclose varies according to the local state laws. It could take anywhere between 3 months to 1 year. In the interim, the home owner can try different measures to avoid foreclosure such as a short sale, a deed in lieu of foreclosure, or loan forbearance. If all else fails, filing chapter 13 bankruptcy could possibly help the owners retain their home.  

When chapter 13 is filed, the court issues an “order for relief” that puts an “automatic stay” on the collection activities of all the creditors immediately. In the event, a foreclosure sale is scheduled, it will be legally postponed while the bankruptcy is pending unless the lender files the “motion to lift the stay” and the court grants permission to proceed with the sale. Typically, the sale will still get postponed by at least 2 months.

The mortgage loan is a secured debt that cannot be rescheduled or undergo a reduction in its unpaid balance. While the bankruptcy is active, the home owner has to stay current with all mortgage payments. Additionally, a repayment plan of up to 5 years can be drawn to pay off the loan amount in arrears. If all the arrear payments are made till the end of the repayment period, the default is cured and the home owner can save the home.

Moreover, under this chapter the second and third mortgage payments can be eliminated especially when there is no equity in the house to secure these loans, some of the unsecured debts can be discharged or reduced, wage garnishment can be avoided, co-signors are protected, interest rates on certain loans may be reduced, and the payment terms on most debts can be extended.

The chapter 13 repayment plan allows for payments using multiple sources of income such as royalties and rents earnings, social security benefits, pension payments, wages and/or business profits, and child support or alimony.

Individuals having regular income and an unsecured debt of <= 250,000 and a secured debt of <=750,000 can qualify to file for chapter 13 bankruptcy. Please seek legal advice for latest revisions in bankruptcy code and updates on inflation adjusted debt limits. 

"Note Country, a professional notes buyer can help the seller sell a note if the borrower is behind in payments, and/or has filed bankruptcy resulting in a non-performing asset."

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