If your California home is in imminent danger of foreclosure, one option that may be available for you to be able to stay in your home is Chapter 13 bankruptcy. This is also known as a reorganization bankruptcy. Chapter 13 provides an immediate alternative to foreclosure. Under Chapter 13, a sale in foreclosure will not be able to take place while your debts are reorganized and a plan is made.

Under a Chapter 13 reorganization, a bankruptcy judge can approve a plan that will provide how debt, such as a mortgage, will be made current. This plan will typically be effective over a three to five year time period.

During the bankruptcy, the mortgage payments, as well as any other required bill payments, need to be made. So long as these payments remain current, a lender must accept these payments and cannot pursue a foreclosure on your home.

Another option that may be available to help homeowners alleviate their financial burden is to pursue a loan modification on their mortgage. Even when a homeowner is actively going through the Chapter 13 bankruptcy process, many lenders are willing work with a homeowner in obtaining a modification on the homeowner's loan.

However, most lenders will require at least a period of one year with consistent mortgage payments before the bank will allow a loan modification if missed mortgage payments have resulted in a foreclosure action.

Chapter 13 bankruptcy offers at least one way for California residents to stay in their homes. If you have questions about protecting your home and your legal rights during tough financial times, an experienced bankruptcy attorney can help you understand the legal options that are available to you.

Source: Fox Business, "Bankrupt, Underwater and Want to Refinance," Justin Harelik, July 26, 2011