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Bankruptcy provides strong debt relief for defaulted homeowners

In Ohio as in all other states, the federal Bankruptcy Code provides strong debt relief measures for qualified individuals and married couples. The protections for consumers filing bankruptcy are embodied in Chapter 7 or 13. Chapter 11 is a bankruptcy filing that generally is concerned with providing debt relief remedies for business entities.

For individuals and married couples who have fallen behind in their residential real estate payments, Chapter 13 is the remedy that will most suit them if they wish to attempt to retain their home. The format of a Chapter 13 proceeding involves a payment plan that is monitored and administered by a Chapter 13 trustee. The plan may last up to 60 months and it involves the homeowners making monthly predesignated payments to the trustee toward the back amounts due on the mortgage.

Chapter 13 is essentially for persons who have steady income and who can afford to bring their mortgages current within the time span that is provided. The income of the Chapter 13 participants must be back to normal or improved by the time of the filing. This is because the homeowner is required to continue making the regular mortgage payment each month in addition to the monthly amounts designated for arrears in the Chapter 13 plan.

Where the homeowner makes all of the payments provided in the plan and keeps the regular monthly mortgage payments current, the mortgage will be fully repaired and brought current by the time of plan completion. After the bankruptcy, the payments are continued to the mortgage lender as specified by the original terms of the mortgage. Because the lender, whether located in Ohio or elsewhere, must abide by a duly approved Chapter 13 plan, this is a powerful remedy for homeowners seeking to save their homes. The plan will also usually provide for the discharge of all unsecured debt with the payment of a small premium that is built into the monthly plan payments, thus giving a fresh start and a clean slate on all debt treated in the plan.

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