Foreclosures & Bankruptcy
Are you having difficulty paying your mortgage? If you have missed several payments, you could be in danger of losing your home to foreclosure. Filing for bankruptcy may help you keep your home.
The process of foreclosure can begin after a homeowner falls behind on their mortgage, usually by three or four payments. In foreclosure, the lender may begin the process of selling the home at auction to recoup what they are owed on the loan. The foreclosure process includes several steps, and the homeowner must be notified that foreclosure proceedings are underway.
If you find yourself in this situation, filing for bankruptcy may help you stall foreclosure or avoid it altogether.
The Automatic Stay
Immediately upon filing for either Chapter 7 or Chapter 13 bankruptcy, an automatic stay is put into place which demands creditors stop any and all collection efforts. If a lender has scheduled a foreclosure sale for your home, the automatic stay will legally postpone this sale, usually for three to four months, while the bankruptcy is pending.
There is an exception to this rule in Chapter 7 bankruptcy:
Motion to Lift the Stay. After you file for bankruptcy and the automatic stay is put into place, the lender may file a motion to lift the stay in Chapter 7 bankruptcy. Should this motion be granted, you will not have the typical three to four month lead time before your home can be sold. However, filing for bankruptcy should still give you at least two months before the home is sold.
Thus, if your home is in foreclosure or you are behind on your mortgage payment and you wish to keep your home or any other real estate you own, you would want to file Chapter 13 bankruptcy and not Chapter 7 bankruptcy.
File for Chapter 13 Bankruptcy to Keep Your Home
If you have fallen behind on your mortgage payments and are out of options for paying back what you owe, or your home or property is already in foreclosure, then Chapter 13 bankruptcy is the best option for keeping your home.
In Chapter 13 bankruptcy, you pay back what you owe (“cure your arrears”) through a repayment plan. This plan will allow you to pay off your debts over a period of time that you propose, anywhere from three to five years. While you make the payments on (and eventually pay off) your arrearage, you will be able to keep your home. Keep in mind: you will need at least enough income during this time to cover both your arrearage payments and your current mortgage payments.
Filing for Chapter 13 bankruptcy may also turn your second and third mortgages into unsecured debt if your home or property’s fair market value is less than the principal balance due on your first mortgage. If this is the case then second and/or third mortgage can be stripped, meaning it become unsecured debt, which is the lowest-priority debt and often does not even need to be paid back in Chapter 13 bankruptcy.
Dealing with a potential foreclosure can be extremely stressful. The experienced attorneys here at Burr Law Office are here to help you keep your home. Give us a call to schedule your free consultation today.