It’s no surprise to anyone that foreclosures have been on the rise in the last couple of years. Many times foreclosures happens to people through no fault of their own. It could be due to a change in their finances, illness, divorce, or a multitude of other reasons. If you are facing foreclosure just know that bankruptcy might be able to help. Filing a chapter 7, for instance, could delay the foreclosure proceedings by a couple of months. If you are willing and able then you may want to look at saving your home through the filing of a chapter 13 bankruptcy.
What is foreclosure?
When homeowner falls behind on their payments, usually for many months, the lender begins the legal process of selling the home in order to get payment for the loan. But, the sale of the property doesn’t happen overnight. It is usually a long and drawn out process with many steps in the legal system. It’s during this time that you could try some alternatives to save your home or delay the foreclosure. You may try to do a short sale, or a deed in lieu of foreclosure, or you could see about getting a loan modification. We are seeing more and more people in foreclosures getting principal reductions. Another option to foreclosure could be loan forbearance If you’re in a foreclosure you will want to explore all of your options with your lender.
Now, if you’ve already tried to work with your lender and they haven’t been responsive to you in a positive manner, you may want to consider filing a chapter 7 or Chapter 13 bankruptcy. Here’s more on how filing a bankruptcy may help you.
Delaying foreclosure with an automatic stay
No matter the chapter you file, there is an automatic stay order issued by the court. This stay tells your creditors to stop their collection practices against you. They must do this immediately upon your filing a bankruptcy. For instance, if your home is scheduled for sale at an auction you could stop the sale by filing a bankruptcy.
If you make no plans to catch up the arrears or make known your intentions to surrender the property then the lender will file a motion to lift the stay. When granted by the courts this will remove the automatic stay and allow the lender to move forward with the foreclosure.
Foreclosure in a chapter 13
If you are wanting to save your home but you are behind on your mortgage then you will want to consider a chapter 13 bankruptcy.
In a chapter 13 you will be given a payment plan to get caught up on the arrears on your mortgage, you will be given 36 to 60 months to get caught up. Just know that you
will need to show proof of the income to be able to afford those payments. After all, you will be making your current mortgage payment plus the payment on arrears.
You may not be able to show that income today, but that’s another way that a chapter 13 could help. The chapter 13 bankruptcy will also eliminate your unsecured debt. This could give you more income to put towards your home.
Bankruptcy and Second Mortgages or HELOCS
There is another reason to file a bankruptcy that many people don’t know about. Here in Florida especially, home prices are way down. Many times your home could be worth less than what your first mortgage is. If this is the case then many times a second mortgage or your HELOC could be stripped off as unsecured debt. This can be done in a chapter 7 or a chapter 13 bankruptcy.
Some other reasons to consider a bankruptcy are that with the delay of a sale of your home you will be given a chance to start saving money when you have to move. Many times when you surrender your home in a bankruptcy you can live in the home free for many months. When you file you will be canceling debts and tax liabilities for property that you owned.
Next steps
If you think that you may consider filing a bankruptcy get the facts as to how the law pertains to you and your situation. Be careful of reading about or listening to someone speak about THEIR situation. It may sound similar but every bankruptcy case is different. Contact the Law Offices of Jill McDonald to get your free consultation. (727) 231-4300
