If you have missed several mortgage payments and your mortgage lender is threatening to foreclose on your home (or a foreclosure lawsuit has already been filed), it is important to consider all of your debt relief options. Filing a personal bankruptcy is a common way homeowners try to avoid losing their home in a foreclosure action.
The two main types of bankruptcy cases filed by individuals are Chapter 7 and Chapter 13. Each type has its advantages and disadvantages. Thus, you should confer with a seasoned bankruptcy attorney to review your unique circumstances and make sure you understand how each type of filing will impact you.
A Chapter 7 filing (commonly referred to as a ‘liquidation bankruptcy’) can result in your non-exempt assets being liquidated to pay your creditors. However, the reality is that most Chapter 7 debtors have very few assets that are not protected by exemptions, so they get to keep all of their assets while discharging the majority of their debt. A Chapter 7 filing does not permanently stop a foreclosure action, but it can buy you more time to stay in your home and to negotiate with your mortgage lender. After your bankruptcy has been filed, your lender can file a motion for relief from the automatic stay which, if granted by the court, allows the creditor to continue with the foreclosure process. Obtaining relief from the stay takes time, usually several months, which allows you to make plans to either keep your home or locate new housing. Finally, if your house is foreclosed, the deficiency balance that remains due to your lender after the property is sold is discharged. In other words, you are not liable to pay the mortgage lender the balance due.
A Chapter 13 filing requires a debtor to submit a plan of reorganization, which outlines how you will repay and handle your debt. A Chapter 13 plan lasts for three to five years. During this time, you can make small monthly payments dedicated to repaying the delinquent amounts on your mortgage loan. At the end of your Chapter 13, you will be current on your mortgage obligations. In other words, as long as you make your Chapter 13 plan payments, the foreclosure action is halted and you are allowed to live in your home.
We understand that facing foreclosure and/or bankruptcy can be intimidating. At The Law Office of Diane Anderson, our lawyer has been through a divorce, a bankruptcy, and faced estate planning and probate termination after her mother passed away at a young age. This kind of experience is unmatched by attorneys who have simply guided their clients through each process. Contact us today to schedule a comprehensive consultation.