Falling behind on mortgage payments is a common occurrence in the United States. While there are lenders who are willing to work out an alternate payment agreement, such as a loan modification, refinance or short sale, there are other lenders that make it impossible for homeowners to get out of the red. Those lenders who are unwilling to work with homeowners turn to foreclosure, which involves the repossession and resale of the home.
Foreclosures can take up to several years depending on court case loads. A mortgage lender will not start the foreclosure process until you are at least three months past due on your mortgage. Bankruptcy can help you keep your home and could possibly help you get on track with the lender so that the threat of future foreclosures is minimal.
The Automatic Stay
After you file for bankruptcy (Chapter 13 or Chapter 7), the court will issue an “Order for Relief” that gives you an automatic stay. Creditors must cease all collection attempts regardless of how far behind you are or what collection attempts they have made prior to you filing. If you have a foreclosure pending or even a foreclosure sale schedule, these are all postponed until your bankruptcy is complete.
How Chapter 13 Can Help
If you file Chapter 13, the courts will establish a repayment plan that helps you pay off any past due debts. You’ll be able to propose how long you want to pay, but remember you’ll want to make sure you have enough funds to cover both your past due repayment plan as well as current payments on your mortgage. As long as you make the repayment plan payments, as scheduled, your home will not be foreclosed.
If you have a second or third mortgage, Chapter 13 may re-categorize those mortgages as “unsecured debt”, which means they will be last priority and you may only have to pay a portion of the amount due back. In the Southern District of Florida, you may also participate in the Mortgage Modification Mediation program to modify your mortgage loan.
How Chapter 7 Can Help
In Chapter 7, you may lose your home. That is because Chapter 7 forgives all debts, and requires you to not pay them back, but that also means the lender may be allowed to take possession of the home. That being said, there are ways to file Chapter 7 without losing your home. Also, in the Southern District of Florida, the Mortgage Modification Mediation program is available to Chapter 7 filers.
If you are current on your home and you file a Chapter 7 case, you will not lose your home so long as you remain current in the payments.
Speak to a Skilled Bankruptcy Attorney First
Saving a home during bankruptcy is not easy. There are a lot of factors that could prevent foreclosure, but a lot of factors that could encourage it, too. Meet with Bankruptcy Attorney in Jupiter at the Law Office of Kelley & Fulton today for a free consultation regarding your foreclosure and we can help you protect your home. Call to schedule by dialing 561-491-1200.