Can I save my house if the mortgage holder has started a foreclosure action?
As long as there has not been a foreclosure sale, even after foreclosure paperwork has been sent to you, the foreclosure action would be stopped with the filing of the bankruptcy case, and the mortgage default could be made up. If you are able to formulate a plan that meets the tests below, and would provide for resuming the payments and making up the default, then a Chapter 13 filing would still save the house.
There are really four tests that are used by courts in deciding whether to confirm a Chapter 13 plan. The Debtor needs favorable rulings on all of the following issues, and may have other criteria to consider:
- Are the unsecured creditors getting as much over the life of the plan as they would have received if the Debtor had filed a Chapter 7 and non-exempt property was sold?
- Does the plan pay all secured creditors in full, plus interest, to the extent of the value of collateral, and pay all past due support and taxes in full?
- Does the monthly amount equal the amount available from all of the Debtor’s income after reasonable expenses, for at least three years?
- Does the overall effect of the plan suggest the Debtor is acting in good faith?
- The Debtors sometimes have to propose more than one plan in order to convince the trustee and the Court that the plan meets all of the criteria above.