For California homeowners who are facing financial struggles, hanging on to the family home is often a top priority. However, the loss of an income, mounting medical debt, unexpected expenses and other circumstances can make it nearly impossible to stay on top of one's monthly mortgage obligation. For those who are committed to keeping their home and restructuring their finances, chapter 13 bankruptcy can offer a solution.
When most people think about bankruptcy, it is often Chapter 7 that immediately comes to mind. This is the most common form of bankruptcy, and it will often lead to the elimination of virtually all forms of unsecured consumer debt. Chapter 13 is different in that filers are not seeking the elimination of all of their debt but are hoping for a restructuring of their current obligations.
Under Chapter 13, any home foreclosure action will be immediately ceased. Filers are given the opportunity to restructure their debt to allow repayment over a longer term. While certain debts can be eliminated through the discharge process under Chapter 13, this type of bankruptcy is better thought of as a tool in making debt more manageable rather than eliminating the obligations altogether.
Many California residents have worked long and hard to purchase their homes. In addition, a family's home holds a great deal of sentimental value, and it is where many cherished memories are made. Hanging onto this asset is a priority for many, even when financial strain is severe. Fortunately, Chapter 13 bankruptcy offers homeowners a chance to remain in their home while also gaining control over their debt.
Source: The Washington Post, "What happens to your house when you file for bankruptcy", Jonnelle Marte, July 26, 2016