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Chapter 13 can work much better than Chapter 7 if you have a second mortgage, get behind on property taxes, or have a tax lien on your home.


The last two blog posts were about situations in which a homeowner is current on the mortgage but has other debts on the home. We showed how Chapter 7 “straight bankruptcy” can work well enough in the 6 debt situations we covered.

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Filing a Chapter 7 case stops foreclosure of your home temporarily, helping you gather funds for your transition to your next housing.

Last week we went through a list of ways Chapter 7 buys you time when dealing with a home foreclosure. Included was that filing a Chapter 7 case “can give you time to surrender your home while saving up for moving expenses.” This deserves a more thorough explanation.

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Falling behind on home’s property taxes creates a special problem. The tax collector will likely be much less pushy than your mortgage lender.


Falling Behind on Property Taxes

If you have a mortgage on your home you can fall behind on your property taxes two ways.

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If you’ve fallen behind on your mortgage, it’s very hard to catch up. It may even seem impossible. Chapter 13 makes it possible.

The Problem

Let’s say you can’t pay your monthly mortgage because of a job loss or some other major financial hit. The missed payments can pile up fast. The amount you’re behind gets huge fast. It usually takes quite a few months before your home would be foreclosed. That gives time for the missed monthly payments to pile up. For example, if your mortgage payment is $1,700, six missed payments put you $10,200 behind. And that doesn’t count late fees and other likely charges assessed to your account.

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Here’s an example of how Chapter 13 can allow you to hold onto your home but then change your mind about it later.

Our last blog post introduced the option of saving your home through Chapter 13, while keeping open the possibility of surrendering the home later if your circumstances change.

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