How Chapter 13 Actually Works When Behind on a Mortgage

House with a calculator - calculating housing costsOne of the main reasons that people file a Chapter 13 “adjustment of debts” bankruptcy is because of the many tools it provides to enable them to hold onto their homes. One of the most important of those tools is being able to have three to five years to catch up on back mortgage payments.

Advantages over Chapter 7 “Straight Bankruptcy”

First, you get much more protection under Chapter 13. In a Chapter 7 case, if you were behind on your mortgage your lender could start or resume a foreclosure right after your three-to-four-month Chapter 7 case is over (and possibly even sooner).

In contrast, under Chapter 13 that protection, called the “automatic stay,” lasts and in the right circumstances can protect your home throughout the three-to-five-year long case.

Second, under Chapter 7 if you were behind in your payments at that time and wanted to keep your home, you would have to make arrangements directly with your lender to catch up. You would be at the lender’s mercy about how much time you’d be given to do so. About a year is often the maximum amount of time. It generally doesn’t care what other obligations you have. If you have fallen behind by $10,000 or $20,000, or more—not unusual these days—coming up with the necessary $1,000-2,000 per month beyond your regular monthly mortgage payment to catch up in time is simply impossible for most people.

In contrast, Chapter 13 significantly lowers your monthly catch-up portion of your payment by stretching out your repayment period to as long as five years, throughout which time you are protected from foreclosure as long as you fulfill your commitments. Your catch-up payment is based on what you can afford, and other urgent obligations—your vehicle payment and child support arrearages, for example—can sometimes come before or are paid in tandem with the mortgage arrears.

“Stripping” a Second or Third Mortgage

If you have a second or third mortgage, and your home is so much underwater that it’s worth less than the amount of debt on your first mortgage, there’s a good chance that you could stop paying that second mortgage altogether as soon as you filed your Chapter 13 case. And if you are behind on that second or third mortgage, you would likely NEVER have to catch up on the missed payments. Usually most of that mortgage debt would be discharged (legally written off) at the end of your successful case. The second or third mortgage (possibly both) would be “stripped” off the title to your home, getting you that much closer to building equity in the home.

Property Taxes

If you’ve fallen behind on your mortgage you’ve likely fallen behind on your property taxes as well. If so, that provides an extra legal justification for your mortgage lender to foreclose on your home. Plus you are also at risk of a foreclosure by the property tax authority itself.

Chapter 13 can be the best way to deal with property tax arrears, by dealing with it similar to the mortgage arrears: you are given up to five years to catch up on the back property taxes, with payments are based on what your budget can afford, throughout which time you are protected from both mortgage and tax foreclosure.


At the end of your successful Chapter 13 case you would be caught up with your mortgage(s) and any back property taxes, you may have saved tens of thousands of dollars by “stripping” a second and/or third mortgage, and you would be current on your home and able to take advantage of its potential future increase in equity.

If the prospect of being current on your home and be otherwise debt-free appeals to you, and you live in the Dallas-Fort Worth area, call me so we can meet to find out how Chapter 13 can help with your home. My name is Carrie Weir, and I’m a Texas bankruptcy attorney serving the Metroplex, especially the area around Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite, and Rowlett. Please get in touch with me for a free and confidential consultation so that you can make informed choices about your home and the rest of your finances. Call 972-772-3083 or use the contact form here. Thank you.

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Call Rockwall bankruptcy lawyer Carrie Weir at 972-772-3083 or fill out the contact from below for a free, confidential consultation to discuss your options.

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