Avoiding Foreclosure in Bankruptcy

Avoiding Foreclosure in BankruptcyOne of the greatest concerns that many people face with bankruptcy is the fact that they might lose their home. The chance that you could lose your home comes down to the type of bankruptcy that you file for. Depending on how much money you owe on your home and your current financial situation, there could be a number of factors that might affect the chance that you could lose your home in a bankruptcy claim. Here are some details on how you can go about avoiding foreclosure in bankruptcy:

Foreclosure

Foreclosure is a legal process in which a lender can seize ownership of a home when a homeowner falls behind on their mortgage payments. Various areas will have a series of laws when it comes to the nature of foreclosure. The lender will apply the proceeds on the fast sale of a home to the overall mortgage balance that’s owed on a home. The difference between the amount that is acquired in the sale as well as the amount that is owed is considered a deficiency balance. If the lender is unable to recoup extra money that’s owed on the mortgage in this deficiency balance, the homeowner may still be responsible for extra mortgage balance owed to the lender.

The foreclosure process doesn’t happen overnight and it’s likely that a borrower will have to miss many payments overtime before the proceedings take place with the lender. Most lenders will proceed with multiple warnings, the offer of loan extensions, and more before foreclosure takes place. 

Using An Automatic Stay

Bankruptcy does offer a form of protection against foreclosure. If you would like to prevent the foreclosure of your home it’s possible to use an automatic stay as a result of a bankruptcy petition. From the moment that you file for bankruptcy, an automatic stay will be issued and put an immediate halt on any type of collection associated with your financial accounts. Filing a bankruptcy petition will prevent the foreclosure sale of your home and make sure that the sale of your home will be postponed until the conclusion of your bankruptcy. 

Under Chapter 7 bankruptcy, filing for the bankruptcy process can delay the sale of your home by 3 to 4 months. This isn’t always guaranteed however as the lender can contact the courts to lift the automatic stay if they need access to the funds from your home. If this occurs it’s often wise to contact a lawyer to advocate on your behalf as the foreclosure may be prevented with the right representation. 

Chapter 13 offers a different type of protection in bankruptcy and you may be able to keep your home within the agreed repayment plan for your mortgage. 

Assistance With Chapter 13 Bankruptcy

If you wish to keep your home, chapter 13 bankruptcy is often a better option for managing your debt. A Chapter 13 bankruptcy is one of the best ways that you can pay off some of the late or unpaid debts that you might have over a period of time. Normally a Chapter 13 bankruptcy will take 3 to 5 years and if you follow the set plan and make arrangements you can proceed over 3 to 5-year payment schedule and avoid the foreclosure on your home. 

Multiple Mortgages On A Home

Chapter 13 bankruptcy may also allow you to eliminate extra payments if you’ve taken a second or third mortgage on your home. The first mortgage of your home is secured by the value of your home and as long as you continue to hold equity in your property, you will have this mortgage protected. A chapter 13 bankruptcy can remove some of the extra deaths associated with a second or third mortgage and place them into a category of unsecured debt. This is the type of debt that is commonly associated with credit card debt and it is given priority amongst other types of debt in bankruptcy. A portion of this debt will likely have to be paid but it’s possible that you could come to an agreement that could excuse some of it. 

Equity That’s Non-Exempt

It’s quite unlikely that many people filing for bankruptcy will have full equity in their home. As the real estate market throughout the United States has recovered, the value of homes has skyrocketed and as a result, many people that are filing has extra equity locked up in their home. Homestead exemptions have occurred as a result of the recession in 2008. If you have a Homestead exemption that’s enough to keep your home, you will have to pay for the value of the non-exempt property under the Chapter 13 repayment plan and then have the option to keep your main residence is part of your filing process. 

If you could use assistance in the process of filing for bankruptcy, contact our team today. We have the legal advocates that are available to help you manage the stress of bankruptcy. Contact us today and we can walk you through the process of keeping your home.