Chapter 13 bankruptcy is often used to save a home from foreclosure. Generally upon the filing of a chapter 13 case, foreclosure cases are stopped and a person is given the opportunity to propose a chapter 13 plan to save their home from foreclosure. A chapter 13 plan offers various alternatives on how to save a home from foreclosure.
Under a chapter 13 plan, a debtor may propose to catch up their mortgage payments over a period of up to 60 months. For example, if a person is behind $10,000 in payments and their regular mortgage payment is $850.00, they would pay $166.67/mo. plus their regular mortgage of $850.00 for a total of $1,016.67 together with any other amounts due under the plan
Avoidance of Junior Mortgage
Under some circumstances, some junior (i.e. second or third mortgages) may be partially or wholly avoided if the value of the involved real estate does not exceed the amount owed on the first mortgage. For example, if the real estate has a value of $100,000.00 and the payoff of the first mortgage is $110,000.00, any junior mortgage may be partially or wholly avoided.