Will Bankruptcy Save My Home From Foreclosure?
I often receive calls from distressed people trying to desperately save their home from foreclosure, and most callers are confused about what bankruptcy can do for them when it comes to saving their homes from foreclosure.
Can bankruptcy save your home from being foreclosed on?
The short answer is yes. However, how long bankruptcy is able to stop a foreclosure from occurring depends on the type of bankruptcy you file.
Chapter 7 Bankruptcy:
If there’s a foreclosure proceeding pending against you and you file for Chapter 7 bankruptcy, then the bankruptcy will stop the foreclosure immediately. However, a Chapter 7 bankruptcy will only stop the foreclosure for the duration of the case (case closed) or until the Bank files a Motion to Lift the Automatic Stay. If the bank files a Motion and you don’t have a reasonable defense as of why the court should not approve it, then the court will issue an order to Lift the Automatic Stay and the bank will be able to continue with the foreclosure proceeding. Usually, even if the Bank files the motion, filing for bankruptcy is still a good choice because it will still give you a couple of months, after the bankruptcy case is filed, to decide what you would like to do about your home and your living arrangements. When the bankruptcy case closes the Bank is free to continue foreclosure proceedings. Thus, if you would like to keep the home you will have to pay your outstanding mortgage payments to the bank or reach an agreement with them.
Chapter 13 Bankruptcy:
If there’s a foreclosure proceeding pending against you and you file for Chapter 13 bankruptcy, then the bankruptcy will, like in a Chapter 7, stop the foreclosure immediately. A Chapter 13, unlike a Chapter 7, is a payment plan for those with regular disposable monthly income. In a chapter 13 bankruptcy case, you file a payment plan with the bankruptcy court in which you promise to use your disposable monthly income to repay a percentage of your debts over a 3-5 year period.
A Chapter 13 would be the best option if you would like to save your home from being foreclosed on. However, you would have to have enough disposable income to catch up on your missed payments and pay your mortgage at the same time. You would have 3-5 years to catch up on your missed payments. In addition, in a Chapter 13 is possible to eliminate a second mortgage lien from your home (“Lien Stripping”). If a second mortgage lien is eliminated it would make future mortgage payments more affordable.
Whether you would like to save your home from being foreclosed on is a personal decision, but you should keep in mind that if a home is under water by a large sum, then there’s a high likelihood that the home will never reach a pre real estate crisis price level, thus economically it may not be worth saving.
Speak to an experienced Maryland and Washington D.C. Bankruptcy attorney before filing for bankruptcy. A bankruptcy attorney will advice you if bankruptcy is a good option for you depending on your individual circumstances.
A Washington D.C. bankruptcy attorney could give you advice on the effect that filing for bankruptcy will have. Ready learn more about the bankruptcy process? Call 202-445-4775 or contact us for a consultation.