Chapter 13 Can Cure A Default
Stoping foreclosure. In the case of a real estate foreclosure, the debtor files the Chapter 13 case which imposes an immediate automatic stay and stops the foreclosure. This must be done before the foreclosure auction takes place and notice of the automatic stay needs to be given to the necessary parties.
Plan to cure the default. The debtor now has to do something in the case to cure the default on the loan. The court is not going to simply let the debtor sit there and enjoy the benefits of ownership without the burdens of making payments. So what actually happens is under the Chapter 13 law and the local rules of the bankruptcy court the debtor is required to commence making regular monthly payments again on the mortgage. Payments must commence with the next payment that comes due following the filing of the bankruptcy case. Now in additional to paying regular monthly payments the debtor has to do something to catch up the default.
Gradual cure of default. The best way to understand the process is that the debtor is drawing the line in the sand and says, “I am buried up to my neck in debt and delinquent payments; I am not going to go any deeper in the hole; I am going to start making regular monthly payments and in addition to that I will pay some extra money to gradually catch myself up”. It’s the payment of those extra monies that will allow the debtor to cure the default on their property over a reasonable period of time. The concept is really fairly simple although in practice it can become quite complicated.