Chapter 13, Stay, & Default

Chapter 13, Stay, & Default

We defaulted on our Chapter 13 plan. What are our options?

I live in San Bernardino County, CA. My husband and I filed for Chapter 13 in May. We started falling behind in mortgage payments, causing the lender to lift the automatic stay. We are worried because we don't know how much time we have in the home. Prior to filing Chapter 13, the home was scheduled for a trustee's sale. I was told that we go right back to that point, now that the automatic stay has been lifted. Is it best to follow through with the whole foreclosue process, or should we scramble in contacting a Realtor to try to get the home short sold? What are our options and what will cause less strain on our financial future? Also, right now our credit report states our mortgage is included in the Chapter 13, will it say different now that the automatic stay has been lifted?

My first reaction is for you to consult with your bankruptcy attorney before opening any negotiations with the bank holding your mortgage.

If your attorney approves of your doing so, you have no reason not to open a negotiation with your bank regarding a short sale or deed in lieu of foreclosure. Both of these options are less expensive than a foreclosure for your bank, and are much, much less damaging to your credit score.

To learn more about these options, see the resources A Deed In Lieu Of Foreclosure vs. A Short Sale and I Can't Afford My Home, What Should I Do?

Regarding your credit report question, credit reports are imperfect snapshots of a consumer's history 60 to 90 days in the past. Any changes to your Chapter 13 status will appear in a month or two at the earliest. How the creditor will report the change in status is anyone's guess, and I doubt any creditor handles this type of situation consistently. See the credit resources page to learn more about credit reports.


Foreclosure is a serious situation that has serious repercussions. If you can, you want to avoid a foreclosure as much at all costs. is here to help. We also offer helpful guides, foreclosure FAQs, glossary terms, and other helpful tools to help you keep your home and avoid a bank repossession.

You can find more in depth information about foreclosures on our foreclosure page on our foreclosure information page.

I hope this information helps you Find. Learn & Save.




BBill, Feb, 2010
Assuming zero costs incurred for the foreclosure (which there are so my math is precise but not accurate), the sales price was $361 minus $327 for the first mortgage leaves $37. The second was $97. So $97 minus $37 leaves a deficiency balance of $60K on the second remaining. That is how much you owe the second mortgage holder. Do the math with the collection agent, and explain that you will pay 10 cents on the dollar for the actual deficiency balance.
SSusan, Feb, 2010
I foreclosed last year on my home with 2 mortgages. I got a call today from the second lender offering a 10% settlement on a $97,000 loan. I don't have the money. They gave me until the end of month to decide what to do. My principal for the 1st is 327,000 and the lender brought the house back for 361,000. Does the second gets any of this money? what shall I do? miles
BBill, Feb, 2010
Your statement, "I have been paying the estimated 31% of my income, which is lower than the contractual mortgage payment" confuses me. Do you mean this is lower than the original amount in your loan, or lower than the amount agreed to in the loan modification? My recommendation is to bring the latest documentation to your attorney and ask him or her to interpret Chase's reasoning for denying the permanent loan modification.
TThe Californian, Feb, 2010
I live in Santa Clara County, I filed for Chapter 13 in April, 2009 and at the same time my attorney submitted a loan modification plan to CHASE. Since then I have been paying the estimated 31% of my income, which is lower than the contractual mortgage payment. Never been late nor missed any payment during this period. However, the lender, CHASE, got permission from the court to lift the automatic stay and permition file for default if I did not make the missed payments. I don't understand what is happening here! I did not miss payments, but made lower amount payments every month, am I facing a foreclosure here? what should I do? is the unpaid portion of the monthly payments between the estimated lower payments and amount should have been paid will push me into foreclosure? this is my primary house, living in here over 20 years, don't want to foreclose, what recommendation you may have?