The Basics: Will Bankruptcy Stop my Foreclosure?
Losing your home to foreclosure is a traumatic experience, and not just because of the damage to your credit rating. Removed from your residence under the watchful eye of local law enforcement, it’s easy to feel humiliated in a community you once called your own. The damage may take years to recover from emotionally. What many homeowners fail to take advantage of are the legal options available to them when their financial situation takes a dramatic turn for the worse. Our attorneys explain what bankruptcy can do for them when foreclosure looms in the near future.
The Automatic Stay Rules for Bankruptcy
The “automatic stay” is an order applied by the court when you submit your application for bankruptcy. The order blocks all actions by creditors against you while your bankruptcy is in process, including mortgage foreclosure. The bank or other lender holding your home loan cannot seize the property, if they have not begun foreclosure proceedings prior to the automatic stay. Unfortunately, if your lender has already filed for foreclosure with the court, the automatic stay cannot stop them from seizing your home. That’s why it’s important to contact a lawyer and file for protection before the lender gains the upper hand.
Filing for Chapter 13 Debt Restructuring
A Chapter 7 bankruptcy does not address your secured debts, including a home or auto loan. If you’re trying to save your house, that’s not the most effective route for you to do so. Chapter 13, however, provides an opportunity to restructure your secured debts and pay them back over a fixed period of time — usually three to five years. The restructuring allows you create a manageable monthly payment that still address’s your creditors’ desire to recoup on debts owed while also recognizing that your current obligations exceed your ability to pay. You need a little help, and this chapter provides that assistance.
As long as you make timely payments, your creditors cannot take your assets, including your home, within the bounds of the law. Once you emerge from bankruptcy, just continue to make your mortgage payments as normal.
Communication with Lenders is Important in Foreclosure
Buying time to get your application materials together and apply for bankruptcy is crucial to its success. Your legal team needs to gather your financial information, including your income and total debt, to present a compelling case to the court that you qualify for restructuring under Chapter 13. If you’ve remained in contact with your mortgage lender throughout your delinquency, and attempted good faith payments when you could afford it, you should have the wiggle room available to stave off formal foreclosure proceedings. Ignoring the problem won’t make it go away, and could even make the lender more aggressive in trying to reclaim the property.
Are you afraid your growing debt might cost you your home? You need the services of experienced bankruptcy lawyers to help you dig out from the financial hole you find yourself in. Contact our law offices immediately for an in-depth review of your case. We’ve helped thousands of consumers across New Jersey get their lives back on track.