Foreclosure Rise Continues: Chapter 13 Bankruptcy Saves Homes

With the foreclosure rise continuing for the ninth straight month, according to the latest ATTOM report, homeowners must understand how Chapter 13 bankruptcy is the only reliable way to legally save their home.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways:

• Foreclosures are Rising: The latest ATTOM report confirms that U.S. foreclosure activity has seen sustained monthly increases.
• The Automatic Stay is Immediate: Filing for any bankruptcy (Chapter 7 or 13) immediately triggers the Automatic Stay, which legally halts the foreclosure process and cancels the scheduled sale date.
• Chapter 7 Does Not Save Your Home: Chapter 7 only provides a temporary delay (typically 4–6 months) because it does not offer a legal option to cure the mortgage arrears. The lender retains their lien and can resume the foreclosure once the case is closed.
• Chapter 13 is the Only Solution: Chapter 13 bankruptcy is the only legal tool for saving your home from foreclosure.
• Lender Negotiations are Risky: Relying solely on loan modification or forbearance is risky because it requires the lender’s approval, losing valuable time since the process tends to be lengthy.

Foreclosures Are Rising: The Warning for Homeowners

Facing homeownership is part of our financial goals, but mounting economic pressure is making this goal harder to attain. According to the latest report from ATTOM, the U.S. Foreclosure Market Report for November 2025, was up 21% compared to the same time last year.

This marks the ninth consecutive month of year-over-year increases, with foreclosure starts alone climbing to 17% annually. If you are a homeowner facing foreclosure or have fallen behind on your payments, the time to act is now.

If you are facing foreclosure, you have likely heard that bankruptcy can stop the process. This is true, but the difference between Chapter 7 and Chapter 13 bankruptcy is the difference between a temporary pause and a permanent solution that saves your home.

The Immediate Pause: The Automatic Stay

The Automatic Stay is a powerful tool in the bankruptcy arsenal that takes effect the moment your petition is filed with the court. It does the following immediately:

• Stops the foreclosure process!
• Cancels any scheduled foreclosure auction or sale date.
• Halts all collection efforts, including phone calls and letters from creditors.

While the Automatic Stay only offers a temporary shield. The long-term outcome depends on the specific chapter you file.

Chapter 7: The Foreclosure Delay

Chapter 7 bankruptcy is a powerful tool for eliminating unsecured debt like credit cards, medical bills, and personal loans. It provides a financial fresh start by wiping out the debtor’s personal responsibility for these debts.

However, if your primary goal is to keep your home, filing Chapter 7 will result in losing your home.

With Chapter 7 bankruptcy, at most you can buy a few months, assuming a motion isn’t filed by the mortgage lender to lift the stay (remove it).

Chapter 13: The True Home-Saving Tool

If you have a steady income and want to save your home, Chapter 13 bankruptcy is the definitive legal solution. It is often called the “reorganization” or “wage-earner’s” plan, and it is designed to help you restructure your finances and catch up on secured debts over time.

The core difference is that Chapter 13 allows you to use a court-approved repayment plan to cure the mortgage arrearage (catch up on your payments) while maintaining your regular, ongoing payments. Here is how the process works:

1. Stop the Foreclosure: The Automatic Stay halts the process immediately.

2. The Plan: The proposed payment plan, which typically lasts 3 to 5 years, must be filed within 14 days of the filing of the bankruptcy petition.

3. Catch Up On Payments: The total amount of your missed payments (your arrears) is broken up into manageable monthly installments and included in your Chapter 13 payment plan.

Depending on your agreement with the bankruptcy lawyer, the attorney’s fees could also be included in the plan.

By the end of the 3-to-5-year plan, you will have paid off all the arrearages, and your mortgage will be current. You also would have substantially reduced your credit card debt, and depending on specific factors, you might have also paid off your car loan! This is known as the cramdown.

Sometimes, Chapter 13 bankruptcy will even reduce or eliminate a second mortgage or Home Equity Line of Credit (HELOC), depending on the equity in your home.

Chapter 13 also offers the opportunity to address other issues, such as:  

• Back taxes (IRS or state).
• Past-due car payments.
• Domestic Support Obligations, such as child support and alimony/spousal support.

Steps to Consider Before Filing for Chapter 13 Bankruptcy

Before filing for bankruptcy, there are other options available, such as forbearance or a loan modification.

Forbearance is a temporary agreement to pause or reduce your payments for a set period. However, it is not debt forgiveness. Once the period ends, the full payment resumes. Generally, any missed payments are added to the end of the loan. One of the more serious issues with a forbearance is the length of the process. The mortgage lender may reject your application after months of waiting, leaving you right back where you started, but closer to foreclosure or the sale date.

Sometimes, a foreclosure is initiated even while in the application process and actively communicating and negotiating with the mortgage lender.

Loan Modification is a permanent change to the terms of your loan (e.g., lower interest rate, longer term, or capitalizing the arrears). Lenders are generally slow and inefficient with this process. They require extensive paperwork, and there is no guarantee you will be approved. If your application is denied, the lender will proceed with the foreclosure, often with a sale date only weeks away.

The Professor’s Note: Unlike forbearance or loan modification, which require the lender’s approval, a Chapter 13 plan is a federal legal right that forces the lender to accept the repayment terms set by the Bankruptcy Court. It takes the power out of the lender’s hands.

The Professor’s Conclusion

The rise in foreclosure filings reported by ATTOM underscores a clear reality: lenders are increasing their activity and will move forward regardless of the current state of the economy.

If you are behind on your mortgage, wasting time waiting for a lender’s approval can be catastrophic. Only Chapter 13 bankruptcy provides the legal right to catch up on missed payments. Remember, a forbearance or loan modification is not a requirement. It is up to the lender’s discretion, unlike a Chapter 13 bankruptcy, which is court-approved.

The most important step you can take today is to be proactive. Waiting until it’s too late is not to your advantage.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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