If you are a homeowner who falls behind on your mortgage payments, it might seem impossible to make your account current again. If the bank isn’t patient, it may accelerate your payments, requiring you to pay the full amount due on the mortgage, and may foreclose on your property if you don’t.

Fortunately, a Chapter 13 bankruptcy can make it possible to dig yourself out of this hole and keep your home. It allows you to pay off many of your debts over a three- or-five-year period while in most cases reducing the amount you pay. And at the end of the bankruptcy, your remaining debts can be discharged, meaning that you no longer owe them.

The immediate benefit of a Chapter 13 filing is that an automatic stay goes into effect, which prevents the mortgage lender from taking any action to declare the loan in default or to pursue foreclosure. The stay remains in force throughout the life of the Chapter 13 plan as you make your required payments on time, including payments on the mortgage arrears. You must also keep up with your ongoing mortgage payments during the plan, or else the court may lift the stay and allow foreclosure.

Chapter 13 helps homeowners to get relief from their mortgage arrears in other ways. One option is known as a “cure and maintain.” This means you keep paying off your mortgage arrears gradually over the course of the court-approved plan. However, since the Chapter 13 plan will last for five years at most, you may not be able to satisfy a large amount of arrears within that time. You also will likely be required to pay various costs and fees the bank imposed as part of your loan, though you may be able to challenge those charges as invalid. If the court agrees, they may be reduced or even eliminated.

Another possible remedy is to secure a loan modification through the bankruptcy court’s loss mitigation program. If the bank chooses to participate, it may agree to a reduced monthly payment of principal and interest, which is typically 2/3 the size of your current payment. You will also have to pay the full amount of your real estate taxes and as well as homeowners’ insurance premiums.

The Law Offices of James C. Zimmerman can explain these and other advantages of Chapter 13 bankruptcy and can answer any other bankruptcy questions. Call us at 973-764-1633 or contact us online to schedule a free consultation at any of our five offices, located in Vernon, Wayne, Pompton Lakes, Hackensack and Nutley, New Jersey.