Why Isn't Filing a Ch. 13 Bankruptcy Saving This Home???

[Ibrahim Hughes]

Hi All - just came across a seller who wishes to sell her home in foreclosure (under water). The surprising thing was that she filed chap. 13 BK and (according to her) wasn't allowed the option to save the home she's actually living in.  I thought chap. 13 BK stopped a foreclosure on your primary residence and allowed you to make payments. No?

[Joel Owens]

There has to be more to this than the seller is telling.

When they file chapter 13 it creates an automatic stay. Then a hearing is set for a meeting of creditors. At the meeting any of the creditors can object to being included in the filing. After the meeting then the conformation hearing is set sometime in the future.

Once the plan is confirmed the timeline of the chapter 13 repayment plan starts. Usually it is for 3 to 5 years time. At anytime during the plan a creditor can file a "motion for relief" of the stay if they are not receiving the payments in full and on time as outlined in the plan. The filers BK attorney can file a counter motion to the relief of stay request and propose an alternative plan to catch them up. The court can then deny the relief from stay and approve the new plan for that creditor. 

If a filer completes the whole chapter 13 then it becomes discharged. If the plan is never finished at some point it gets dismissed. Only a very tiny percent every finish the plan out to the end. There are some investors that specifically track and follow up with cases to see when they fall out as they can get 1 month jump or better on other investors. 

You might want to get authorization to speak to their BK attorney to see exactly what is going on. 

No legal advice given.