How Can a Chapter 13 Bankruptcy Stop Foreclosure in North Carolina?

From the team at Huggins Law Firm, P.C., we want to talk about the power to stop a foreclosure.

This is a different kind of financial stress. You are not (just) buried in credit card debt. You have a job. You can afford your life. But something happened—a job loss, a medical crisis from a Personal Injury, or a Divorce—and you fell behind.

Now, you are getting threatening letters. You have a “Notice of Sale.” You are living in fear that you are going to lose your family’s home.

Chapter 13 Bankruptcy is the single most powerful tool in the law to stop this.

It is not a “liquidation.” It is a “reorganization.”

It is a legal tool that lets you force the bank to stop the foreclosure and lets you catch your breath. It gives you time—3 to 5 years—to get caught up on your payments.

If you are a homeowner in Greensboro, High Point, or anywhere in the Triad, and you are living in fear of foreclosure, this is the guide you need to read.

Key Takeaways: Your “Save Your Home” Plan

We know you are scared. If you only read one part, read this:

• Chapter 13 STOPS Foreclosure. Instantly. The moment we file your case, the “Automatic Stay” legally forbids the bank from selling your home. It can stop a sale scheduled for tomorrow morning.
• This is a “Payment Plan,” Not a “Wipe-Out.” Chapter 13 is a 3-to-5-year “reorganization.” It’s designed for people who have a steady income but just need to get caught up.
• You “Cure” Your Mortgage: Chapter 13 lets you take all your past-due mortgage payments (the “arrears”) and spread them out over the 3-5 year plan.
• You Can “Strip” a Second Mortgage: If your home is “underwater” (worth less than your first mortgage), we can often remove your second mortgage or HELOC entirely.
• It Can Also Save Your Car: It works the same way for a car. It stops repossession and lets you “cure” the past-due payments.
• Your Other Debts Get Handled, Too: Your credit cards and medical bills get rolled into the plan, and you pay them back based on what you can afford.

Who is Chapter 13 Bankruptcy For?

Chapter 13 is a “wage-earner’s plan.” It is the best (and sometimes only) option for two types of people:

1. The “Catch-Up” Filer: This is the most common. You have a steady job, but you fell behind on your “secured” debts (like your mortgage or car payment). You don’t want to lose your house. You just need a legal way to catch up.
2. The “Makes Too Much” Filer: This is someone who needs to file for bankruptcy (they have a lot of credit card debt) but they make too much money to pass the “Means Test” for a Chapter 7 Bankruptcy. The law requires them to file a Chapter 13 and pay something back.

In both cases, Chapter 13 is a powerful shield.

How Chapter 13 Immediately Stops a Foreclosure

This is the most important part.

As we explain on our main Bankruptcy page, the moment our law firm files your Chapter 13 petition, a federal law called the “Automatic Stay” goes into effect.

It is a legal shield that immediately stops all collection actions.

This includes foreclosure.

It does not matter if your house in Burlington is scheduled for a foreclosure sale tomorrow at 10:00 AM. If we file your case at 9:00 AM, the sale must be stopped.

It is illegal for the bank to proceed.This is the “emergency brake” that gives us the time to build your “catch-up” plan.

The Chapter 13 “Reorganization Plan”: How It Works

This is the “map” for your next 3 to 5 years. A Chapter 13 is not a “wipe-out” like Chapter 7. It is a “payment plan” that you create, and the court approves.

Here is how it works, step-by-step:

1. You “Propose” a Plan: Our firm will work with you to create a detailed, 3-to-5-year budget. This “plan” shows how you will use your income to pay your bills.
2. You Make ONE Monthly Payment: You will no longer pay your creditors directly. Instead, you will make one affordable, consolidated payment each month to a person called the “Chapter 13 Trustee.”
3. The Trustee Pays Your Creditors: The Trustee is like a “payment distributor.” They take your one payment and use it to pay all your different debts, in the right order.

How the Plan Handles Your “House Payment”

This is the brilliant part. Your plan splits your mortgage into two pieces:

• Your Regular Payment: You will start making your normal, ongoing mortgage payment again.
• Your Past-Due Payments: The plan takes all the payments you missed (the “arrears”) and stretches them out over the 60 months (5 years) of the plan.

A Simple Example:

• You make $2,000/month on your mortgage.
• You missed 6 months. You are $12,000 behind.
• A 5-year (60-month) plan lets you “cure” that $12,000 by paying just **$200/month** extra.
• So, your new payment to the Trustee would include your $2,000 + $200 (plus other debts and fees).
• At the end of the 5 years, you are 100% current on your mortgage, and you kept your home.

This is called “curing the default,” and it is the most powerful home-saving tool in the law.

The “Magic” of Chapter 13: “Stripping” a Second Mortgage

This is an advanced, powerful tool that many people don’t know about.

If your home is “underwater,” a Chapter 13 can sometimes remove (or “strip”) your second mortgage or HELOC (Home Equity Line of Credit).

How it works:

The law says this is only possible if your house is worth less than what you owe on your first mortgage.

• Example:
  • You owe $250,000 on your first mortgage.
  • Your house, in today’s market, is only worth $240,000.
  • You also have a $40,000 second mortgage.

In this case, because the first mortgage is “underwater” (you owe more than the house is worth), that second mortgage is 100% “unsecured.”

A Chapter 13 plan allows us to re-classify that $40,000 second mortgage. It becomes just another “unsecured debt,” like a credit card.

This means it gets put in the “unsecured” pile, and it gets paid “pennies on the dollar.” At the end of your plan, the entire $40,000 lien is removed from your house. This is a game-changer.

What Happens to My Other Debts (Like Credit Cards)?

A Chapter 13 plan handles all your debts.

Your “unsecured” debts (credit cards, medical bills) go into the “unsecured pile.”

Your plan says that after you pay for your “secured” debts (like your house/car) and your “priority” debts (like child support or recent taxes), any money “left over” will go to this pile.

Here is the “Fresh Start” part of a Chapter 13:

Your unsecured creditors get “pennies on the dollar.” They get whatever you can afford to pay them over the 5 years.

And at the end of your plan, any “unsecured” debt that is still left over—no matter how much—is 100% discharged (wiped out).

You come out of a Chapter 13 with your house, your car, and zero credit card or medical debt.

Why Our Firm is the Right Guide for This Journey

A Chapter 13 case is not a “simple form.” It is a five-year journey. You need a lawyer you can trust, and a team that will be there for you.

It is also a legal process that often starts with a life-changing event.

• Are you in Chapter 13 because of a Divorce? Our firm has decades of experience in both. We know how your divorce decree directly impacts your bankruptcy plan, and vice-versa.
• Are you here because of a Personal Injury that left you with medical bills and out of work? Our firm can handle both cases, making sure your settlement is protected while your house is safe.
• Are you behind on Criminal court fines? We know exactly how those are treated in a Chapter 13 plan.

Our firm is uniquely positioned to see the whole picture of your life. We are not a “bankruptcy mill.” We are a full-service law firm for families in Greensboro, Winston-Salem, Burlington, and all over the Triad. We are here to be your guide for the entire journey.