You can run out of options fast.
You apply for a mortgage modification, only for the bank to deny it. You try to catch up, and you find it impossible. You try to stall through any of the legal remedies open to you, and you fend off scammers. But you’re really only buying time.
Though there are specific foreclosure defenses that work at specific times, bankruptcy is one of the easiest ways to save a home that’s in trouble.
Once you file for bankruptcy, the automatic stay kicks in. This means your bank can’t take any collection actions, including foreclosure, until the bankruptcy is complete. And by the time the bankruptcy is complete, you should be in a better position.
In most cases, you’ll file for Chapter 13. You’ll continue to pay your mortgage, though the amount you owe could be crammed down to what the house is actually worth. The automatic stay protects you as you complete your bankruptcy plan.
Your mortgage payment may be part of your ongoing Chapter 13 payment. They may also be separated out. Keep in mind that you must remain current on your mortgage payment during the plan to maintain the protection. But when you’ve only got one debt payment to make that’s been based on your budget, instead of multiple payments that utterly disregard your budget, it’s a lot easier to keep up.
Even if your mortgage payment remains separate, your mortgage arrears may be rolled into your bankruptcy plan.
See also: What is an Unconscionable Home Loan?
If you still owe a balance after the plan is complete, you can keep your home by continuing to make your payments. You may also choose to try to sell the home or modify the mortgage while you are still working through the plan, using the automatic stay protection to keep foreclosure off your credit report while you find a buyer or work through the grueling loan modification process.
Chapter 7 works a little differently. You can keep your home if the equity in the home falls under federal exemptions. If your equity does not exceed the exemptions you owe too much for the trustee to get you paid by selling the home anyway. But you’ll have to reaffirm your debt with your mortgage company to keep the house, and you’ll have to keep the payments current.
No matter which form of bankruptcy you choose, you can rest assured that if it’s handled correctly you will have an excellent shot at keeping the home you’ve worked so hard to hold on to.
See also: What is an Emergency Bankruptcy Filing?
The first step? Hiring an experienced bankruptcy lawyer you can trust.
If you’re in Pennsylvania or New Jersey, call Sadek and Cooper for a free consultation. We can take a look at your unique situation and give you some additional insight into what we can do to save your home.