Few things are more stressful than facing foreclosure on your home. Despite the best-laid plans, though, you may have fallen behind on your mortgage payments. While some mortgage companies are willing to work out deals with you (like a short sake, or a loan modification), others are not. And while State and Federal programs offer assistance in loan modifications to some homeowners, you may not qualify for such. If you don’t qualify for these programs, how can you stop foreclosure?
Understanding the Foreclosure Process
The foreclosure process begins after you miss 3 or more consecutive mortgage payments. Your lender will send you a notices of possible foreclosure. This beginning process can take from several months to a full year. If you are looking to stop the foreclosure process, contact a lawyer as soon as possible.
How to Stop Foreclosure With an Automatic Stay
When you file for bankruptcy an automatic stay goes into immediate effect. With an automatic stay all creditors must back off and all civil lawsuits must stop. That includes foreclosure. But what type of bankruptcy should you file? Here is a quick breakdown of the two types of bankruptcies that can stop your foreclosure.
Filing for Chapter 7 Bankruptcy
Chapter 7 bankruptcy allows you to discharge all or part of your debt. You qualify for Chapter 7 if you and your spouse have a combined income below the average of a family of your size.
When you file for bankruptcy protection under Chapter 7, an automatic stay goes into effect. It’s important to remember that this automatic stay is only temporary and doesn’t kill the foreclosure entirely. Lenders can also file a motion to lift an automatic stay. These motions to lift an automatic stay are difficult to fight in court. Often the only way to stop one of these motions is to get payments up to date or make arrangements to do so.
An automatic stay will also end when discharge is granted. That typically occurs around three months from when the case is filed. After the discharge, lenders can simply restart their lawsuit and reinstate foreclosure.
Filing for Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows you to reorganize your debt and submit a repayment plan to your creditors that is then approved by a bankruptcy trustee.
An automatic stay will also go into effect when you file Chapter 13. However, unlike Chapter 7, filing for this bankruptcy can stop foreclosure long term. With Chapter 13, you can keep your home as long as you provide proof of sufficient income to maintain your current mortgage and make your repayment plan payments. Most repayment plans meet the maximum of 60 months.
Filing for Chapter 13 bankruptcy can also open the door to a lien strip. A lien strip benefits homeowners with multiple mortgages by eliminating all mortgages except the first one. If the value of your home declines and your first mortgage secures your home’s equity, all other mortgages are then considered unsecured debt and are discharged.
Other Ways to Stop Foreclosure
Bankruptcy is not the only option you can use to stop foreclosure. In some cases, in fact, it may cause more harm than good. We recommend consulting your foreclosure lawyer to weigh your best option. Here are some other ways you can stop foreclosure.
A homeowner can challenge a lender when there are clear errors in the process. Such cases include when ownership is in question or when the servicer fails to follow procedure. These types of cases are rare. We advise allowing your lawyer to answer the complaint and request mediation.
Mediation programs allow borrower and lender to come together in an effort to resolve the matter. Sometimes participating in mediation opens the door to a foreclosure avoidance option, such as a modification. At the very least, with mediation you will buy yourself more time to live in your home.
With a modification you can modify your unappealing mortgage circumstances into a performable product. This will be in line with your current income and and property value. However, the borrower must state a hardship.
Contact a Bankruptcy Lawyer to Stop Foreclosure
If your home is in danger and you’re looking to stop foreclosure, contact Gregory J. Wald, Attorney at Law today to speak to an experienced bankruptcy lawyer. We can discuss your options and develop a strategy that meets your needs.