When you fall behind on your mortgage payments, it can seem like the world is closing in on you and there’s no way to avoid foreclosure. However, there is hope regarding foreclosure by filing a Chapter 13 bankruptcy.
Bankruptcy has ways to stop, delay and in many cases pay back the mortgage arrearages amount (which allows you to keep the home). Learn how, and why you need a bankruptcy attorney to help.
Automatic Stay Stops Foreclosure
When you file your bankruptcy petition with the court, you are granted an order called the ‘automatic stay.’ This order forces creditors to stop trying to collect on their debts. This includes mortgage companies who are trying to foreclose on your home.
While the automatic stay will help pause the foreclosure proceedings, it is not a permanent solution – but it can buy you time. If the creditor has already scheduled your home for auction, the sale will be postponed while the bankruptcy works to resolve the issues with the mortgage. This gives you extra time to try to get caught up on your payments to prevent foreclosure, work through a loan modification, or make other arrangements to resolve the mortgage issues.
Get Caught Up on Payments Through Chapter 7 or Chapter 13
If you file for Chapter 7 bankruptcy, and if your home is scheduled for foreclosure, the bankruptcy will provide at least a brief hold on the sale. What happens next depends on a number of things, including the equity in your home, whether the Chapter 7 trustee takes an interest in the home, and whether — after the Chapter 7 bankruptcy — there are other options that you may have, like a loan modification. Filing for Chapter 7 at best buys you the extra time through the automatic stay to try to make up your payments or negotiate with your lender to avoid bankruptcy, but this protection is often short lived and Chapter 7 creates other concerns if there is significant equity in your home.
If you want to avoid foreclosure, filing for Chapter 13 bankruptcy is typically the long-term option to consider. Through Chapter 13, you can catch up on mortgage arrears through a court-approved payment plan. This gives you the duration of the payment plan – 3 to 5 years – to make up for your late payments. You must also make your current mortgage payments on time. If you pay off your missed payments and stay current on your upcoming payments, you can often avoid foreclosure altogether and emerge from bankruptcy without any mortgage arrears.
Chapter 13 can also be beneficial if you have multiple mortgages on your home. If the value of your house has dropped, then in some instances you may be able to completely eliminate (or in bankruptcy terms ‘avoid’) a second or third mortgage. These would not be secured by the value of your home. Although this option has become much more infrequent with the equity and value of primary residences in recent years, it is something that you can review as part of the bankruptcy process.
How a Bankruptcy Attorney Can Help
If you are facing foreclosure, it’s essential to consult a bankruptcy attorney. A lawyer can help you determine if filing for bankruptcy is the right solution, or if there is another way to avoid foreclosure. They can also counsel you on which type of bankruptcy to file, and the pros and cons of each.
A bankruptcy attorney can also answer your questions and help address any hesitations you might have about filing for bankruptcy. While bankruptcy might appear to be a dead end for you financially, we are here to help you understand that it is just the beginning of your financial future.
Let Us Help You
Are you facing foreclosure on your home? Don’t stress. Let our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. review your options and help you decide if bankruptcy is the right option for you. We work for you, the people, and not institutions. Contact us for a free case evaluation, or no-obligation consultation. We are dedicated to helping you overcome this small bump in the road and assisting you to get on with your life.
