The thought of losing your home can be devastating. If you are facing a foreclosure action, it is important to seek legal assistance and learn what your options are for dealing with it. One option you may want to consider is filing a Chapter 7 or Chapter 13 bankruptcy. Many bankruptcies are filed by homeowners attempting to halt or avoid foreclosure of their home.
A qualified bankruptcy lawyer will help determine if you qualify to file a Chapter 7 or Chapter 13. There are pros and cons to each type of bankruptcy, but both implement the automatic stay as soon as your petition is filed. The automatic stay halts all collection activity against you, including the foreclosure process.
A Chapter 7 is often referred to as a “liquidation” bankruptcy because your non-exempt assets can be sold to pay your creditors. However, in the majority of Chapter 7 filings, the debtor has few (if any) non-exempt assets so there is nothing for the trustee to seize and sell. Additionally, a Chapter 7 will halt a foreclosure proceeding and provide you a few extra months in your home and the possibility of negotiating a settlement with your mortgage lender. However, your lender has the ability to file a motion for relief from the automatic stay. If the court grants the lender’s motion, the stay is lifted and the lender can proceed with the foreclosure. The good news is that if your home is foreclosed, the Chapter 7 filing allows you to discharge or eliminate any deficiency balance remaining after the home has been sold at auction. This often saves the homeowner from being liable to repay thousands of dollars.
A Chapter 13 debtor files a plan of reorganization that sets forth how you intend to repay your creditors. A Chapter 13 plan lasts for a period of three to five years. Your plan can include a provision allowing you to cure your past due mortgage payments and bring you current on your loan. Thus, as long as you are making your Chapter 13 plan payments, the foreclosure process is stopped.
Don’t face your foreclosure alone. Contact us for a free consultation to explore your options for trying to save your home.