Nothing is more devastating than finding out that you are at risk of losing your family home as a result of missed mortgage payments. But unfortunately, this is a sad reality for many people across the United States. In fact, the Federal Deposit Insurance Corporation (FDIC) estimates that 1 in 200 homes will be foreclosed upon in the U.S. Furthermore, the FDIC reports that 250,000 families enter foreclosure proceedings every three months.
If you are struggling financially, you may not be able to make your monthly mortgage payments. As a result, your lender could threaten foreclosure. If you are at risk of losing your home, it’s important to know what to do to save your family home from foreclosure. It’s also important to seek legal representation from a skilled foreclosure prevention attorney.
CAN FILING FOR CHAPTER 7 BANKRUPTCY STOP FORECLOSURE?
Filing for Chapter 7 bankruptcy will trigger an automatic stay, which will pause all collection activities, including foreclosure proceedings. This automatic stay won’t last forever, but it will buy you some time so the lender cannot foreclose on your home while you sort out your finances in bankruptcy court.
The lender can resume foreclosure proceedings as soon as your Chapter 7 bankruptcy case has closed. However, most debts are discharged in Chapter 7 bankruptcy proceedings, which should leave you in a better financial position. Now that these debts are gone, it may be possible for you to make mortgage payments and avoid foreclosure.
CAN FILING FOR CHAPTER 13 BANKRUPTCY STOP FORECLOSURE?
Filing for Chapter 13 bankruptcy will also trigger the automatic stay, so foreclosure proceedings will temporarily stop.
During Chapter 13 bankruptcy, the court will require you to create a repayment plan that outlines how you will make monthly payments to your creditors over the course of three to five years. If you have already missed mortgage payments, you will need to incorporate these missed payments into your proposed repayment plan. However, you won’t need to pay them all at once. Instead, you will need to make small payments on this debt over the course of your three-to-five-year repayment plan. This makes catching up on missed payments far more manageable.
But it’s also worth noting that you will need to make your regular monthly mortgage payments in addition to making these small monthly payments. If you still cannot afford to make regular monthly mortgage payments, you are still at risk of losing your home.
If you have more than one mortgage on your home, filing for Chapter 13 bankruptcy can also help you get rid of the smaller second mortgage. This is known as “lien stripping.” You may qualify for this if the current market value of your home is less than the value of your first mortgage. In this case, the second mortgage can be converted into an unsecured debt. This means it will be treated the same way that other unsecured debts, such as medical debt and credit card debt, are treated in Chapter 13 bankruptcy proceedings. If you qualify for lien stripping, eliminating this second mortgage may make it possible for you to catch up on your other mortgage payments and save your home.
WHAT ARE OTHER FORECLOSURE PREVENTION OPTIONS?
Filing for bankruptcy is one option, but it’s not the only option. There are other ways to prevent foreclosure and save your home, including loan modification.
As its name suggests, a loan modification involves changing the terms of the original loan used to purchase your home. If you have already missed a mortgage payment, modifying the terms of your loan might be the solution to your financial woes.
The lender will typically not be willing to modify your loan unless you can show proof of financial hardship. If you can provide proof, the lender may be willing to make a number of different modifications, including:
- Extending the term of the loan
- Lowering the interest rate
- Reducing the principal
- Switching to a fixed rate
- Postponing payments
Each of these modifications will make the terms of the loan more favorable and the monthly payments more manageable. If you can successfully modify your loan, you may be able to resume making monthly mortgage payments so you can avoid foreclosure.
SEEK LEGAL REPRESENTATION FROM A FORECLOSURE PREVENTION ATTORNEY
Don’t let your lender foreclose on your home. Fight back with the help of the experienced foreclosure prevention and bankruptcy attorneys at Benner & Weinkauf. For decades, we have helped clients in Massachusetts protect their family homes and avoid foreclosure. Now, we can help you achieve this goal as well.
Schedule a free strategy session with our team now to discuss your case. You can reach us by calling 774-404-8321 or submitting your information using the form on this website.