A Bankruptcy can provide a number of benefits for your home. You should read the benefits listed below as they could be very helpful to you TODAY. Many people believe that by filing a bankruptcy they will automatically lose their home, but that is a myth. A bankruptcy attorney can describe which type of bankruptcy is best for you to protect your home and receive certain financial benefits.
Is Your Home Currently In Foreclosure Or Soon To Be?
If your home is about to be foreclosed upon or is currently in foreclosure, then filing a Chapter 13 bankruptcy can force the mortgage companies to stop foreclosure so long as the foreclosure sale date has not passed. It is important that you contact our office immediately because waiting until a day or two before the foreclosure sale date may be too late to gather the necessary documents we need to file your case. If your mortgage company is about to start foreclosure, then we can file a bankruptcy that will stop any mortgage companies from initiating foreclosure and adding substantial fees so long as we make arrangements to pay for the current mortgage payments and any amount that you are behind (usually under more favorable terms)—see below.
Changing The Terms Of Mortgage Arrears (Amount Behind On Your Mortgage)
If you file a Chapter 13 bankruptcy, your home cannot be taken from you, and you receive the benefit of paying your mortgage arrears (amount that you are past due on your mortgage to include interest and late fees up to the date of filing the bankruptcy) at a 0% interest rate, without any additional late fees added after the bankruptcy has been filed, over a 36 to 60 month time period. Effectively, this makes it more manageable to pay your normal monthly mortgage payments while you get caught up on past due mortgage payments a little at a time.
Strip Second Mortgages
Bankruptcy laws make it possible for a debtor in a Chapter 13 case to petition the Southern Illinois or Missouri bankruptcy courts to reclassify a second or third mortgage. “Stripping” a mortgage, as it’s commonly called, is a complicated process. An experienced bankruptcy attorney will be familiar with the process and the paperwork required to attempt to strip second and additional mortgages. Let’s say a debtor has a $150,000 first mortgage and a $30,000 second mortgage. If the home is appraised at an amount below the value of the first mortgage, the lender holding the second mortgage no longer has a secured debt. That’s increasingly the case because of the housing crisis and recession. The court can then reclassify that second mortgage as an unsecured debt, which is much more easily discharged in a personal bankruptcy.
Can You File Chapter 7 Bankruptcy And Still Keep Your Home?
Yes, by meeting certain requirements and signing a reaffirmation agreement promising to continue paying the mortgage loan after the bankruptcy has been filed. Equally important to understand, you can choose to not keep (surrender) your home, or you can choose to keep one home and not another—speak to your bankruptcy attorney about these options.
Foreclosure and Chapter 7
Filing for Chapter 7 bankruptcy could have an impact on an impending foreclosure. When a bankruptcy attorney files a Chapter 7 petition it triggers the automatic stay. This can delay any actions by creditors for as much as three to four months. That’s enough time to try to negotiate some type of loan modification with the mortgage company. It’s important to understand the lender can file a motion to lift the stay, however. In many states, if the foreclosure notice was filed before the bankruptcy filing, a Chapter 7 filing will have little effect on the foreclosure time-frame. An experienced bankruptcy attorney will understand the impact of state laws on foreclosure and bankruptcy.
Important Disclaimer: The information discussed above and throughout this website should not be relied upon to make any decisions without first speaking to a bankruptcy attorney. There are many intricate rules of law governing bankruptcy with many exceptions to the general rules that could change the advice given by an attorney based on the differing facts in each person’s special set of circumstances. THEREFORE, it is important to discuss any information contained in this website with one of our attorneys before taking any action or refraining from taking any action.