It can be daunting to have a foreclosure hanging over your head, but taking proactive action now may help you avoid foreclosure and keep your home. Once the best decisions you can make is to speak with a bankruptcy attorney, because believe it or not bankruptcy can save your home from foreclosure. Not only can bankruptcy help relieve the stress of debt collectors, but it is the key to saving your home.
Is your house in the process of being foreclosed on? Are you months behind on your mortgage and dodging phone calls? If the bank has not yet auctioned off your home then you still have time to call a bankruptcy attorney and get out of debt. Here is how the process works.
How Can a Bankruptcy Save Your Home from a Foreclosure?
Ironically, bankruptcy is actually the best foreclosure prevention available to you. This is because when you file a Chapter 13 or Chapter 7 bankruptcy the court issues an “automatic stay.” If you are sick of being hounded by debt collectors the automatic stay is the best thing that will ever happen to you. It is also a miracle that may help you keep your home.
The Automatic Stay
The automatic stay informs your creditors that they must immediately cease any collection activities. This includes phone calls, letters, garnishments, and foreclosure activity. Even if your home was already scheduled for sale or auction, the automatic stay will be postponed while the bankruptcy is pending. The average bankruptcy takes about three to four months to be finalized, but with the interference of COVID-19 now it can take even longer buying you even more time. A clever bankruptcy attorney can also help lengthen the process to give you more time to get your financial ducks in a row.
Some aggressive lenders may ask the bankruptcy court to lift the automatic stay, but since it takes time for this motion to be heard, the bankruptcy can still buy you two months or so of time. This may be enough foreclosure prevention to help you find a way to get current again.
How a Chapter 13 Bankruptcy Can Save Home from Foreclosure and Restore Your Sanity
Most people do not find themselves in debt magically one day. They struggle with utility bills, credit cards, and their mortgage payment for months or even years before they end up in foreclosure. Daily calls from lenders and banks can be exhausting, but a Chapter 13 bankruptcy can change all of that.
A Chapter 13 bankruptcy filed by a bankruptcy attorney to save your home will buy you three to four months where you don’t have to make any payments on any debt. This timespan can help you get your finances in order.
As part of your bankruptcy agreement, you will then need to pay off all of your debt, or “arrearage” over the length of the repayment plan you choose. Most people choose five years but there is some flexibility attached to a Chapter 13 bankruptcy. The only catch is that you need to have a high enough income to cover your average mortgage payment and the arrearage.
If you can do so once the debt is piled into one location, then you will be able to keep your home and successfully avoid foreclosure. Of course, you are responsible for making payments until the five years repayment plan is paid in full.
Interestingly enough, Chapter 13 does more than just provide foreclosure prevention, it can also help you save your car or other secured debts if you have fallen behind in payments. This is because the automatic stay includes all of your debtors, so any secured debts will also be paused for three to four months. Instead of repossessing a car or other large items, a lender has to wait until the bankruptcy is closed.
You have the option to handle any outstanding payments on secured debts into your arrearages plan as well. For example, you could place your entire car loan into the plan along with your mortgage. Depending on your income level, your bankruptcy attorney may be able to work your unsecured debts into the final monthly plan at a much lower negotiated price. Many people only pay pennies on the dollar.
If you are struggling with a looming foreclosure, reach out to a bankruptcy attorney and see what your options are. The lawyer will sit down and discuss your income and debt to see if a Chapter 13 bankruptcy is a good fit.