How Chapter 13 Bankruptcy Can Help You Keep Your Home
May 14, 2025
When you’re struggling to keep up with mortgage payments and the threat of foreclosure looms over your head, it can feel like you're drowning, with no clear way out. You're not alone. Every year, thousands of New Jersey homeowners face similar situations, whether due to job loss, medical bills, divorce, or simply the rising cost of living.
Fortunately, there’s hope. Chapter 13 bankruptcy might be the lifeline you need to regain control of your finances and, most importantly, keep your home. My firm, The Law Office of Victor Druziako, P.C. in Vineland, New Jersey, has extensive experience helping homeowners facing foreclosure work through the Chapter 13 bankruptcy process.
Allow me to walk you through how Chapter 13 bankruptcy works and how it can help you stop foreclosure, catch up on missed payments, manage debt, and ultimately protect your most valuable asset: your home.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a legal process under the U.S. Bankruptcy Code that allows individuals with regular income to create a structured repayment plan to pay off all or a portion of their debts over three to five years.
Unlike Chapter 7 bankruptcy, which involves the liquidation of assets to pay creditors, Chapter 13 allows you to keep your property, including your house, while making manageable monthly payments based on your income and financial situation.
In essence, Chapter 13 is a court-supervised debt reorganization plan designed to give you breathing room, financial stability, and a second chance.
Chapter 13 Bankruptcy vs. Chapter 7 Bankruptcy
It’s important to understand the fundamental differences between Chapter 13 and Chapter 7 bankruptcy so you can determine which option might best fit your needs.
Chapter 13 bankruptcy is often referred to as a “wage earner’s plan.” It’s for people who have a steady income but have fallen behind on bills or need time to catch up on secured debts, like a mortgage.
Chapter 7 bankruptcy is more appropriate for individuals with little to no income and few assets. It can eliminate most unsecured debt, such as credit card balances and medical bills, but it won’t help you keep your home if you're behind on your mortgage.
If saving your home is a top priority—and for most people it is—Chapter 13 is likely your best route.
How Chapter 13 Bankruptcy Helps You Keep Your Home
Chapter 13 bankruptcy can be an effective way to maintain ownership of your home. Here’s a closer look at how that works:
Automatic Stay
As soon as you file for Chapter 13, a court order known as the automatic stay goes into effect. This powerful legal protection halts all foreclosure proceedings and prevents creditors from contacting you or taking collection actions.
That means:
No more foreclosure notices
No more sheriff’s sale dates
No more harassing calls from mortgage companies or debt collectors
The automatic stay provides immediate relief, giving you time to regroup, strategize, and create a plan to keep your home without the pressure of losing it overnight.
Even if your home is days away from being sold at auction, a Chapter 13 filing can pause the process and give you a real opportunity to fix the situation.
Catch Up on Mortgage Arrears Over Time
Chapter 13 allows you to catch up on missed mortgage payments gradually over the course of your repayment plan, which is typically 36 to 60 months. This is a game-changer for homeowners who are behind but have regained financial stability and can afford regular payments moving forward.
For example, if you're $18,000 behind on your mortgage, Chapter 13 allows you to pay that amount back in manageable installments while you continue making your regular monthly mortgage payment.
This dual-track system of paying your current mortgage while catching up on the past due amount means you can stay in your home without having to pay the full arrears immediately, which most people simply can’t afford to do on their own.
Lien Stripping
Many New Jersey homeowners took out second mortgages or home equity lines of credit (HELOCs) during the housing boom. If your home’s market value has dropped since then, your second mortgage may no longer be secured by actual home equity.
Under certain circumstances, Chapter 13 allows you to strip away these junior liens and treat them like unsecured debts—just like credit card debt.
For example, if your home is worth $300,000 and your first mortgage balance is $310,000, a $40,000 second mortgage may be completely unsecured. Through Chapter 13, this second mortgage can be eliminated entirely after you complete your repayment plan.
Lien stripping can dramatically reduce your debt burden and make keeping your home far more affordable in the long run.
Prevent or Stop a Sheriff’s Sale
In New Jersey, foreclosures can take months or even years due to the judicial foreclosure process. However, once a foreclosure judgment is entered, the lender may schedule a sheriff’s sale of your property.
Filing Chapter 13 (even filing the day before the sale) will automatically stop the sheriff’s sale. The automatic stay will block the sale and give you a chance to save your home.
If you’ve already received a notice of sale, time is of the essence. Contacting a bankruptcy attorney promptly can make the difference between keeping your home and losing it.
Control Your Payment Terms With a Court-Approved Plan
Once your Chapter 13 case is filed, you’ll work with your attorney to propose a repayment plan that must be approved by the bankruptcy court.
This plan is based on your income, expenses, and debts. It allows you to repay what you can reasonably afford while keeping up with mortgage payments and maintaining ownership of your home.
Most importantly, creditors can’t force you into a payment you can’t afford. The bankruptcy court makes sure your repayment plan is fair, realistic, and sustainable.
Avoid Deficiency Judgments After Foreclosure
In some cases, when a home is foreclosed on and sold for less than the mortgage balance, the lender may pursue a deficiency judgment for the remaining amount owed.
For example, if your mortgage balance is $250,000 and the house sells for $200,000, the lender may sue you for the $50,000 difference.
Filing for Chapter 13 can protect you from these judgments. Even if foreclosure is unavoidable, Chapter 13 can discharge the deficiency, giving you a fresh financial start.
What the Chapter 13 Process Looks Like in New Jersey
Filing for Chapter 13 in New Jersey is a detailed process that includes several stages:
Credit counseling: Complete a mandatory credit counseling course within 180 days prior to filing.
File the bankruptcy petition: Your attorney files your bankruptcy petition, schedules, and repayment plan with the U.S. Bankruptcy Court for the District of New Jersey.
Automatic stay takes effect: Instantly stops foreclosure, garnishments, lawsuits, and creditor contact.
341 meeting of creditors: You’ll attend a meeting (usually via Zoom or phone) where the bankruptcy trustee and creditors can ask questions.
Plan confirmation hearing: The bankruptcy judge reviews your repayment plan and either confirms or requests changes.
Start making payments: Payments to the Chapter 13 trustee begin 30 days after filing, even before plan confirmation.
Plan completion and discharge: After 3-5 years of on-time payments, your remaining eligible debts are discharged, and you exit bankruptcy in good standing.
Working with a knowledgeable bankruptcy attorney is crucial to make sure you meet all legal requirements and deadlines.
Maintaining Your Home During Chapter 13 Bankruptcy
Just filing for bankruptcy doesn’t always mean success—you must stay current on your mortgage, trustee payments, and property taxes throughout the plan. Missing payments can result in dismissal or relief from the stay, meaning foreclosure can resume.
That’s why it's critical to budget carefully, communicate with your attorney, and alert the court if your financial situation changes.
Is Chapter 13 Right for You?
Chapter 13 bankruptcy is ideal if you:
Have a regular source of income
Are behind on your mortgage but can afford monthly payments
Want to stop foreclosure and keep your home
Have valuable assets you want to protect
Need time to catch up on debts
It may not be suitable if you have no income, can't afford mortgage payments even with a repayment plan, or have very little equity in your home.
Alternatives to Chapter 13
Before filing, it’s smart to consider other options:
Loan modification: Negotiating new loan terms with your lender
Mortgage forbearance: A temporary pause or reduction in payments
Deed in lieu of foreclosure: Voluntarily transferring the title to avoid foreclosure
Chapter 7 bankruptcy: If your primary concern is unsecured debt and you don’t need to keep the home
Every case is unique. A qualified bankruptcy attorney can help you evaluate all available options.
Contact an Experienced Bankruptcy Attorney Today
At The Law Office of Victor Druziako, P.C., I’ve helped numerous individuals and families fight to protect their homes through Chapter 13 bankruptcy. I understand the stress, the uncertainty, and the fear of losing everything you’ve worked for, and I’m here to provide compassionate support to clients facing foreclosure in Vineland, New Jersey, and throughout South Jersey. Contact me today for more information.