Foreclosure Defense & Chapter 13 Bankruptcy

Recent changes to California law have enhanced the ability of homeowners to protect their homes from foreclosure.  Specifically, the California Homeowners Bill of Rights prevents dual tracking and provides homeowners with other foreclosure defense strategies.  Nevertheless, many California homeowners eventually lose their homes to foreclosure.  Despite the conceptual appeal of the “show me the note” defense in which homeowners attempt to force lenders to show the original promissory note, courts have consistently held that non-judicial foreclosure can be accomplished without showing the original promissory note.  As a result, many homeowners have turned to chapter 13 bankruptcy to stop foreclosure.  By filing chapter 13 bankruptcy California homeowners can stop foreclosure and keep their home while they catch up on late mortgage payments.

The mechanics of chapter 13 bankruptcy in regards to foreclosure is fairly straightforward.  Once a chapter 13 bankruptcy petition is filed with the appropriate U.S. Bankruptcy Court the foreclosure process must stop.  In essence, if there is an impending foreclosure sale it will not take place if a bankruptcy petition is filed before the scheduled sale date.  Once the petition is filed the debtor will propose a confirmable chapter 13 repayment plan that will cure the mortgage deficiency over 3 to 5 years.  Once the plan is confirmed the debtor will keep their home while they make their scheduled payments.  Once the payments are completed the debtor will receive a discharge of certain debts and will no longer be in default of their home mortgage.

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