If you can't keep up with your Chapter 13 payments, you'll be back in the same position later. If, however, you're upside down on your house, it may not be in your best interest to keep the house in the long run. Instead, think about what your long-term goals really are. Do you need time to save up money for a down payment on a rental home and to cover your moving expenses? Are you committed to your home because you want your child to finish the school year there?
No matter how attached you are to your home, if you can't afford it, you can't afford it. And taking on a Chapter 13 to make mortgage payments plus catch-up payments on a home with negative equity doesn't make sense. That's money that can go towards a rental home and then saving up to buy another home, a more affordable home, in the future. But if you don't have money to put a down payment on a rental and to move and need more time, a Chapter 7 will accomplish this.
If you can't afford to catch up on your mortgage and have no equity to protect, here's a viable option. Stay in your home, don't pay the mortgage payments and instead save that toward your down payment and rental expenses. Then wait for your foreclosure notice to come in. It may come in a few weeks or a few months. Once the foreclosure notice is received, that's when the Chapter 7 will make the biggest impact. After the Chapter 7 is filed, the foreclosure will be stopped.
Once stopped, the lender will not usually try to refile the foreclosure for several months and it could be up to six months or more. This is time for you to save up your money, pack up your stuff and look for a new place to live. Once the foreclosure is rescheduled, there will be 20-30 days until the sale takes place. There is an additional 10 day upset period after the sale takes place that will then need to expire. Then there will be the time elapsed to transfer the deed.
Once the deed is transferred to the new owner (usually the lender themselves) they will send a notice to vacate which will give you another 20-30 days in the property. This is when you want to go ahead and move. If you leave before then and the new owner never takes possession, you can still be on the hook for Homeowner's fees, municipal property fines and other expenses. A Chapter 7 should buy you time to save up, get moved and unload other debts so that once you move into your new rental, you'll have peace of mind and can take advantage of your financial fresh start.
If you're behind on your mortgage payments and are looking for a solution, contact the law offices of John T Orcutt for a free consultation. We'll look at your financial information and tell you the best approach to either save your home or stall the foreclosure process while you explore your options.