CHAPTER 7 Bankruptcy
Will filing a chapter 7 bankruptcy save my home from foreclosure?
Probably not.
If you are facing foreclosure you have likely missed a few mortgage payments. Chapter 7 does not allow you to make up your missed payments over time.
However, the “automatic stay” may delay the foreclosure long enough for a homeowner to complete a sale or loan modification.
Automatic stay – An injunction that goes into effect automatically, with some exceptions, when a debtor files for bankruptcy. It, in most cases, automatically stops most lawsuits, foreclosures, garnishments, and collection activities against the debtor.
Generally, Chapter 7 bankruptcy is a better option for homeowners who are current on their mortgage, or at least not in foreclosure, but may be struggling due to other “dischargeable debt”.
Dischargeable debt- Debt that can be eliminated by filing bankruptcy (credit card debt, medical bills, etc.).
CHAPTER 13 Bankruptcy
Will filing a chapter 13 bankruptcy save my home from foreclosure?
Probably.
Chapter 13 Bankruptcy DOES allow you to make up your missed mortgage payments over time (3-5 years). This is done via a monthly payment plan. A portion of your arrearage is paid along with your current monthly mortgage payment as part of your chapter 13 plan.
Also, like a chapter 7, the “automatic stay” may delay the foreclosure long enough for a homeowner to complete a sale or loan modification.
Additionally, you may also be able to “strip-off” a totally unsecured 2nd/3rd mortgage on your primary residence. This would allow the 2nd/3rd mortgage to be treated as any other unsecured creditor. Thus, it would be dischargeable upon the completion of the Chapter 13 plan.
As always, The Law Firm of VAUGHN & WEBER, PLLC is here for you should you need us. We are conveniently located in the heart of Nassau County, at 217 Willis Avenue in Mineola. Contact us at (516) 858-2620 to speak with a bankruptcy attorney.
Please visit our Bankruptcy category to learn more about filing chapter 7 or 13 bankruptcy.
Please visit our Foreclosure category to learn more about foreclosure issues.
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