Can I Keep My House if I File for Chapter 13?

Notice of Foreclosure documents on a table. "Can I Keep My House if I File for Chapter 13?"

Despite your best efforts, you may find yourself falling behind on payments, and your debt may become unmanageable. When this happens, Chapter 13 bankruptcy becomes a very real option to help get your debt under control and your finances back on track. However, filing for bankruptcy is a big step and you may have some questions. One that we are asked frequently is “Can I keep my house if I file for Chapter 13?”

We will address this question and more throughout the course of this article. 

Can I Keep My House if I File for Chapter 13?

The answer is a resounding Y-E-S. Chapter 13 bankruptcy is a powerful tool that can help families and individuals throughout the State of Maryland get their debt under control and it is designed to help you keep assets, like your home, even if you are behind on your payments. Chapter 13 can…

  • Stop a foreclosure and allow you to pay back the arrears that you owe
  • Restructure secured loans such as home equity lines of credit and other liens on real property
  • Catch up on missed payments such as mortgage arrears and pay down some of their obligations
  • And much more!

Bankruptcy is a huge financial step and one that should not be entered into lightly, but, in most cases, allows you to keep your home. Chapter 13 bankruptcy allows a person to keep their assets, but puts them on a strict repayment plan.

Chapter 13 bankruptcy is, of course, not a magical solution that makes all of your debt go away. While some or all unsecured debt such as credit cards and personal loans may be discharged, your mortgage is a secured debt which means that the lien against your home will not be eliminated in a bankruptcy and the debt must be paid if you wish to keep your home.  However, as long as you continue to make your monthly mortgage payments in addition to your Chapter 13 monthly payments, you will be able to keep your home.

How Long Does a Chapter 13 Payment Plan Last?

When a person files for bankruptcy, the automatic stay takes effect and prohibits all collection activities against the individual. Even if your house was being foreclosed on, that process is halted while the court sorts out your ability to pay. This gives you some breathing room to devise your payment plan, which will last between three to five years. The actual length of the plan is dependent on the bankruptcy filer’s, or “debtor’s,” income. If your income is below median in Maryland, your plan can be anywhere from 3 to 5 years (60 months) long. If your income is above median in Maryland, you will typically end up with a 5-year plan. If you have no disposable income, you can ask for a shorter plan. Also, if you will be paying your unsecured creditors 100%, you can have a shorter plan even though your income is above-median. Once the Chapter 13 plan is completed, in Maryland, the debtor must file an “Affidavit Requesting Discharge,” after which the Court can enter the discharge order and the Chapter 13 case can be closed.  However,a lot can happen in 3 to 5 years.

What Happens if I Fall Behind on My Chapter 13 Payments?

A Chapter 13 payment plan assumes that the debtor has regular income to pay down debts, as well as regular monthly bills, such as mortgage or rent, utilities, car loans, insurance, etc. However, as we just mentioned, a lot can happen during the 3 to 5 years of the payment plan. If you find yourself in a situation where you’ve lost your job, become ill or seriously injured and are unable to work, or lose your primary means of transportation and are unable to get to work, you may quickly fall behind on your Chapter 13 payments. In instances like these, the Chapter 13 trustee can ask the Court for the case to be involuntarily dismissed

In fact, more Chapter 13 cases were dismissed in 2020 than were completed. So, it’s important to work with an experienced bankruptcy attorney that can help you to the finish line. In some situations, the debtor may also be able to modify their plan, appeal the dismissal, file for a hardship discharge, or even temporarily suspend the Chapter 13 payment plan.

Additionally, the Bankruptcy Code allows a debtor to request that a confirmed plan be modified by the Court for good cause.  For example, if a debtor was injured at work and could not work for several months, she can ask the Court to suspend payments while she is out of work so that she can complete her Chapter 13 plan.  

Consult a Maryland Bankruptcy Attorney

Chapter 13 bankruptcy is a complicated process. Consulting an experienced bankruptcy attorney, like Steiner Law Group, can help you answer questions like…

Steiner Law Group can help you understand the bankruptcy process and evaluate your options. We are a boutique law firm in Maryland that assists individuals and businesses with bankruptcy and financial restructuring services. We have helped hundreds of individuals, families, and businesses discharge millions in debt. If you have more questions about Chapter 13 bankruptcy, please schedule a risk free consultation or contact Steiner Law Group, LLC a Baltimore, Maryland law firm at (410) 670-7060 to learn more about bankruptcy options.

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About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.