Chapter 13 bankruptcy petitions are commonly referred to as wage earners plans. Under chapter 13 of the Federal Bankruptcy Code an individual or married couple may file a bankruptcy petition before the date of the foreclosure sale and stop the foreclosure sale from taking place.

Under the bankruptcy code, all collection activities, whatever type it may be including a foreclosure sale, garnishment, collection calls or lawsuits are frozen or "stayed" as of the date and time of the bankruptcy filing.

Under a Chapter 13 petition, the debtor or bankruptcy petition filer proposes a plan to the bankruptcy court to slowly catch up on their payments to all secured creditors, like a mortgage payment. The proposed plan may be as long as a period of up to five years.

This gives a homeowner facing foreclosure five years to slowly catch up on the mortgage payments arrearages, or even property taxes rather than pay the full amount of the mortgage payment arrearages all at once to the mortgage company to stop the foreclosure sale from taking place.

Mortgage payments are then made to the bankruptcy trustee instead of the mortgage company, in the form of bankruptcy chapter 13 plan payments. The trustee then redistributes the funds to creditors through a system of priorities.

The difference between bankruptcy cost and filing fees and mortgage payment arrearages may only be a few thousand dollars. But when talking about saving your home, it can be and make all the difference in the world.