A Chapter 13 Bankruptcy petition is filed to protect your assets from liquidation through foreclosure, in the case of mortgaged real estate, and to satisfy your debts. As with a Chapter 7 proceeding, all creditor collection activity against you ceases as of the date of filing, even a mortgage foreclosure sale. A Chapter 13 petition must be used whenever your non-exempt assets would likely be liquidated to pay your creditors, or when your family income levels exceed the limits set forth in the “means test” calculator.
A successful Chapter 13 will allow you to save your home and avoid involuntarily liquidation of your assets. What you basically are saying when you file a Chapter 13 petition is that I am a person with regular income sufficient to pay all or a portion of my debts, including the resumption of my regular mortgage payments, but I need time, from 36 to 60 months, to complete the process.
If you are facing foreclosure of your residential mortgage and your lender is refusing to permit you resume making your regular mortgage payments due to prior arrears, the filing of a Chapter 13 petition may be an alternative to avoid the eventual loss of your home.
As with the filing of a Chapter 7, you must have filed your Federal Income Tax Returns for the past three years and you must complete a credit counseling session from an approved provider.