Filing Bankruptcy to Save Your Home: CHAPTER 7 Bankruptcy
Will filing a chapter 7 bankruptcy save my home from foreclosure?
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.).
Filing Bankruptcy to Save Your Home: CHAPTER 13 Bankruptcy
Will filing a chapter 13 bankruptcy save my home from foreclosure?
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 & Prakope, PLLC is here for you should you need us. Contact us at (516) 858-2620 to speak with a bankruptcy attorney.