Can Bankruptcy Stop Foreclosure?
Often, people facing foreclosure lose hope. With an overwhelming past-due balance, uncooperative mortgage servicers and a tight timeline, it may seem that the homeowner has no options. If you are in this situation and don’t know where to turn, it is time to learn more about bankruptcy. In many cases, Chapter 13 bankruptcy allows a homeowner time to bring mortgage payments current and move forward with greater financial stability.
Chapter 13 Bankruptcy and Foreclosure
For those hoping to save their homes, Chapter 13 bankruptcy may be the solution. Often, people facing foreclosure have the funds necessary to make payment toward their past-due balances, but can’t catch up fast enough to satisfy the lender or mortgage servicer.
In Chapter 13 bankruptcy, the past-due balance can often be rolled into a repayment plan and stretched out over a period of three to five years. The power of a Chapter 13 plan isn’t just in the restructuring of the past-due balance: as long as plan payments are made on time and current mortgage installments are paid as they come due, the creditor cannot take further collection action. That means foreclosure stops, and fees and penalties are limited.
How Automatic Stay Affects Foreclosure
The automatic stay in bankruptcy can temporarily stop foreclosure even if the property has already been scheduled for sale. However, the sooner you take the first step, the better. A free consultation with a local bankruptcy attorney will help you make the best decision for your family and your financial future.
Of course, some people facing foreclosure will be unable to keep their homes, or will determine that they will be better able to build a stronger financial future without the burden of large mortgage payments. In those situations, homeowners may find relief in Chapter 7 bankruptcy.
Chapter 7 Bankruptcy and Foreclosure
Chapter 7 bankruptcy generally will not allow a homeowner to keep the property. The one exception may be when the homeowner is able to catch up the past-due balance quickly and simply needs a small amount of extra time to negotiate a settlement or collect funds to make payment.
However, Chapter 7 bankruptcy can be a powerful tool for a homeowner who either wants to walk away from the mortgage debt or has accepted that he or she cannot afford to keep the house. Some of the benefits of filing under Chapter 7 in these circumstances include:
- The automatic stay can provide the time necessary to negotiate with the lender or mortgage servicer
- The bankruptcy attorney may be able to negotiate for an alternative resolution, such as a deed in lieu of foreclosure
- Chapter 7 bankruptcy can protect the homeowner from responsibility for remaining mortgage debt, if the sale doesn’t cover the full balance of the loan
- Chapter 7 eliminates other debts, such as credit card debt and medical bills, that may be hampering the ability to make housing payments
Different Solutions for Different Financial Problems
Not everyone facing foreclosure is in the same type of financial bind. For some the problem is short-term, while others have been struggling for years. Some could afford current mortgage payments if they could just get caught up, while others have seen their monthly payments jump and can no longer afford their mortgages. For some, saving the house is a top priority, while others just want to get out from under unmanageable debt.
Attorney Sara Rogers understands that every client is a unique person with a unique set of goals and obstacles. Schedule a free consultation today to get individualized guidance on the options available to you.