Bankruptcy and Foreclosure Proceedings
If you are struggling to meet your financial obligations, and have fallen behind on your mortgage payments, you may be worried about a foreclosure proceeding and the loss of your home. You may be considering filing for bankruptcy to prevent or stop foreclosure proceedings. Here’s what you need to know.
The most important thing to understand is that bankruptcy won’t terminate a foreclosure proceeding—it will only suspend a foreclosure action. Once your bankruptcy is complete, your lender can move the process forward again.
That doesn’t mean, however, that a bankruptcy filing won’t help you keep your home. Upon the filing of a bankruptcy petition, an automatic stay will go into effect, preventing your creditors from calling, writing or taking any other legal action to collect debts from you. The automatic stay can get you some relief from the constant outflow of cash. In addition, by discharging other debts, you may be able to free up the funds to make your monthly mortgage payment affordable.
It is also important to understand that you cannot seek to discharge the debt on your home in a Chapter 7 proceeding and still keep the house. Both state and federal bankruptcy laws grant you a certain dollar amount exemption in your home in a Chapter 7 filing, but it’s an exemption in the equity in your home. Unfortunately, you can only recognize the equity in your home when you sell it.
The best way to save your house through bankruptcy is to file Chapter 13 reorganization and work out a new payment plan with your mortgage lender. You will still get the benefit of the automatic stay, and will have that benefit for a three-to-five-year period. In many instances, when you reorganize, you can get your lender to waive late fees and penalties, and fold any arrearages into the principal balance of your note.
Contact John Hargrave and Associates
We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.