Foreclosure – How Filing Bankruptcy Can Help You
March 2, 2016
The lingering foreclosure crisis, a legacy of the housing crisis of a decade ago, is still a hot topic in the financial news these days. A recent spike in foreclosure activity marked the biggest annual rise on record, with more than 123,000 American homes going back to the bank.
Thankfully, for many families who are fearful of losing their home to foreclosure, relief can be sought and found under federal bankruptcy laws. Read further to find out how filing bankruptcy can help you with foreclosure.
Foreclosure in Action
A foreclosure ordinarily does not transpire until you are many months delinquent on your mortgage payments. At this point, the lender will inform you that you are in default and afford you time to catch up. If you fail to catch up during the time provided, the lender will then inform you of its intention to sell your home at public auction, usually within 30 days.
If by that time you haven’t gotten caught up, your home will be sold and will be lost to you unless you can redeem it during the “redemption period” following the foreclosure sale.
How Filing for Bankruptcy Affects Foreclosure
Generally, lenders are prepared to make arrangements with you to remedy your delinquency and keep your property. When this is not the case, however, you will be presented with few other choices and bankruptcy may very well be the only viable option available to you.
There are two main types of bankruptcy proceedings:
- Chapter 7 bankruptcy (Liquidation)
- Chapter 13 bankruptcy (Debt Reorganization)
Both provide for an “automatic stay” of all collection activity as soon as you file the application. The result is that your foreclosure will be put on hold until the conclusion of your bankruptcy, or until the stay is lifted by court order.
This is how it works:
Filing Chapter 13 Bankruptcy to Stop a Foreclosure
Chapter 13 bankruptcy can actually help avoid foreclosure if you file early enough. This is achievable because under Chapter 13 you are permitted to present a plan to reorganize your debt and get caught up with your mortgage payments. If you get caught up within the allotted time frame (three to five years), you will have cured your default and successfully avoided foreclosure.
You must first, however, be eligible for Chapter 13 bankruptcy and have the court agree to your reorganization plan. Approval will largely be based on whether or not after paying off certain other prioritized debts, like child support, alimony, and taxes, you will have sufficient money remaining to render regular installment payments towards your mortgage debt.
Filing Chapter 7 Bankruptcy to Delay a Foreclosure
If you are unable to qualify for Chapter 13 bankruptcy, you may still be able to avail yourself of the advantages offered under Chapter 7 bankruptcy.
Chapter 7 will not allow you to avoid a foreclosure, but it may offer you enough time to get ready for its eventuality and prepare your family and household to relocate.
Under Chapter 7 bankruptcy, a stay against all foreclosure activities will be in effect for the length of your bankruptcy, usually four to six months. Furthermore, during this time, you will be allowed to remain in the home without having to make any mortgage payments. This can be extremely advantageous because it just might allow you to save enough money to secure another place for you and your family to live.
Summary
Many of the homes that are being lost to foreclosure these days are being lost by families who were previously unfamiliar with financial difficulties, but who suddenly find themselves struggling to meet their mortgage payments and for whom foreclosure has become an unavoidable reality.
For many of these families, relief from foreclosure can be found under Chapter 7 or Chapter 13 bankruptcy in the following ways:
If you are eligible for Chapter 13 bankruptcy, you may be able to keep your home by reorganizing your debt.
If you do not qualify for Chapter 13, you can file Chapter 7 bankruptcy to delay the foreclosure proceeding long enough to prepare for its eventuality.
If you and your family are facing foreclosure, you should contact an experienced and knowledgeable foreclosure attorney for more information on how filing bankruptcy can help.
Are You Considering Bankruptcy to Help with a Foreclosure? Contact Jodat Law Group Today
Jodat Law Group has been helping Florida residents evaluate their options and file for bankruptcy for more than 20 years. For more information about the process or to find out if filing for bankruptcy is right for you, call at (877) 563 2852. Or go here to request a free consultation online today.
