Using Chapter 11 or 13 Bankruptcy To Avoid Loss of Property Through Foreclosure
There are several options when filing a Chapter 11 or 13 bankruptcy to stop a foreclosure. Both Chapters 11 and 13 bankruptcy can be set up to reinstate your defaulted mortgage loan, to propose a reinstatement plan, a mortgage modification plan, a refinance plan, a sale plan or another sort of plan tailored to meet your needs.
Reinstating Your Mortgage Loan
Even if you are several months or years behind on your mortgage payment and your lender has started the foreclosure process, we can help you keep your home or your equity. With a reorganization bankruptcy chapter, we can create a debt repayment plan that enables you to repay late mortgage payments gradually over time. The duration of the plan is typically three to five years.
If reinstatement is not possible, a sale, refinance or modification plan can be proposed. The maximum period of time for these sorts of plans is eighteen months. When your bankruptcy case is filed with the court, an automatic stay order will go into effect that temporarily halts most creditors — including mortgage lenders — from taking any further collection activity against you. The automatic stay provides critical time for your bankruptcy case to proceed and for us to seek debt relief on your behalf.
Bankruptcy And Other Alternatives To Foreclosure
At Evans Law Offices, we offer a wide range of services to help our clients find solutions to difficult debt challenges. We have extensive experience helpng our clients avoid loss of property through foreclosure. People who are pursuing a mortgage modification may choose to use the bankruptcy to prevent foreclosure while their mortgage modification is pending. Chapter 13 allows people to propose “modification plans.” Modification plans propose to the court that mortgage arrears accrued to the filing date of the case shall be amortized into a modified mortgage that is pending.
With our years of experience, we have pushed the
boundaries of how the bankruptcy can assist the homeowner on the modification path. A typical scenario is outlined below:
“A plumber has been working to modify his mortgage and has been denied three times; his house is going to foreclose in 30 days. He wants to save his home, and if the modification does not complete, he will work to save his home anyway. He files for bankruptcy protection and reapplies for the mortgage modification through the bankruptcy dept. at the bank; after three months, he is approved for the trial period.” For this individual, the mortgage modification process was boosted by the individual’s bankruptcy case, as the parameters for qualification and approval are different when analyzed through the bankruptcy modification department of the bank, and due to the fact that he gained additional time for the bank to consider the modification application.
Some homeowners who file bankruptcy to stop a foreclosure are able to propose a sale plan. That means that you will be given time to sell the property during the pending bankruptcy case. Usually, this type of plan is used by homeowners who have equity remaining in their home, but can also be effective for short sales if this is cost-effective for the client.
Additional Benefits Of Chapter 13 Bankruptcy
In addition to protecting your home from foreclosure, you may also be able to discharge a significant portion of any remaining unsecured debts at the successful completion of your Chapter 13 plan. Unsecured debts include credit card bills, medical bills and most other consumer debts. Depending on facts of your case, you may even be able to discharge the debt from your second home mortgage. View our second mortgage lien stripping blog post to learn more.