It is not hard to fall behind on a mortgage payment over the 30 year life of this debt. All it takes is one job loss, or one medical condition that knocks out your income for 90 days and you may find yourself in a hole from which it is difficult to climb out.
Some of the first bills to not get paid are the medical bills. Then taxes. Then credit cards. Then the mortgage. Once you fall 3 payments behind on your mortgage, you are at risk to receive what is called a Notice of Default. After that you are looking at a Notice of Trustee Sale, which could result in the loss of your home. There are litigation options available, and your bank has to follow foreclosure laws in order to effectuate a legal foreclosure. But a lot of people get very nervous when dealing with this process after falling behind on their home.
A Chapter 13 can stop this process in its tracks. You will have time to put forth a plan to get current on your arrears. You can either agree to catch up in full over the five years, or pursue a loan modification or find some other way to get current. The biggest advantage here is that the Bankruptcy Court can be used to give you the time you need to get control of your financial situation and find a solution to your mortgage problems.
Now understand, that getting a loan modification is difficult. Several people have had to submit applications multiple times in order to actually get one approved. Others have had to file a lawsuit in order to compel their banks to settle in the way of providing a loan modification. Still others have found a way to pay back what is owed on the current mortgage arrears.
This is one of the reasons why, if you fall behind on your house payment, you should seek legal advice as soon as possible to stop the bleeding and make a Chapter 13 easier for you to catch up if that is your only option.
If no solution is available, then a Chapterr 13 can help to facilitate a sale of the property. For some people, this is far better than foreclosure, especially now that the real estate market has bounced back and some people are actually looking at equity. A Chapter 13 would give you your leverage back and allow you to sell at the top of the market for a price you are comfortable with.
The bottom line is that a Chapter 13 can be a valuable tool in saving your home from foreclosure. It may or may not be a complete solution, but you certainly improve your bargaining position by protecting your home using the Bankruptcy Code.