Stop bank foreclosing
Generally the foreclosure process starts after a homeowner gets behind on paying their mortgage. The lender will then commence the legal action of selling the property through auction in order to regain payment for the loan.
This won’t occur immediately after missing one payment. Usually a lender won’t begin the foreclosure process until you’ve missed multiple payments, many times three of four. That buys you some time to seek what options you have, such as loan modification, a short sale, or a deed in lieu of foreclosure.
But if you’ve already attempted these solutions and failed, now is the time to consider bankruptcy to halt the foreclosure sale. These are some alternative ways to help you by filing for bankruptcy.
The Automatic Stay: Delaying Foreclosure
When you file either a Chapter 13 or Chapter 7 bankruptcy, the court immediately issues an order called the “automatic stay”. The automatic stay forces your creditors to cease their collection efforts immediately. If your home is scheduled for a foreclosure sale, the sale will be legally halted while the bankruptcy is pending, which is generally two to three months.
However, there are exceptions to the rule:
For example, if the lender attains the bankruptcy court’s permission to go ahead with the sale by filing a “motion for relief from stay” you may not get the entire three to four months. Even after that point however, the bankruptcy will generally postpone the sale by at least two months, or possibly more if the lender is slow in obtaining the motion for relief from stay.
How Chapter 13 Bankruptcy Can Help
Many people will do anything it takes to stay in their home for the foreseeable future. If that is something important to you, and you’re behind on your mortgage payments with a likely way to become current, the only way to keep your home is to file a Chapter 13 bankruptcy.
How Chapter 13 Works
Chapter 13 bankruptcy lets you pay off the “arrearage” (past due payments) over the length of a repayment plan that is agreed upon. However, you’ll need sufficient income to at least meet the current mortgage payment at the same time you’re paying off the arrearage.
Providing you comply with all of the mandatory payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home. Chapter 13 could also help you eradicate the payments on your second or third mortgage. That’s because, if your first mortgage is secured by the total value of your home (which is possible if the home has dropped in value), you may no longer have any equity with which to secure the later mortgages.
That allows the Chapter 13 court to “strip” the second and third mortgages and recategorize them as unsecured debt. Under Chapter 13, these debts would take last priority and often does not required to be paid back at all.