A Lawyer to help with...

How To Stop Foreclosure With Bankruptcy

Using bankruptcy to stop a foreclosure is a last-ditch move. Bankruptcy will only temporarily halt foreclosure, but it will give a borrower more time to work our a permanent solution or to raise more funds to cure a default. Stopping  foreclosure with bankruptcy is only one tool in a foreclosure lawyers defense tool-belt.

Buying Time by Stopping Foreclosure With Bankruptcy

The Automatic Stay: Delaying Foreclosure

When you file either a Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an order (called the Order for Relief) that includes a provision called an “automatic stay.” This freezes all creditors in their tracks.

Filing either a chapter 7 or 13 will have the same effect stopping the foreclosure. But each will act different later in the process. SO if bankruptcy is to be a permanent part of a borrower’s loan modification attempt, or financial remodeling, then there is no concern.

But if bankruptcy is simply being used to stop an impending foreclosure, then a 13 can be used, but not completed. This will give a minimal amount of time, but may also decrease your negotiating position with the lender.

The trick of course is to have a permanent plan for when the creditor (the mortgage lender or mortgage servicer) asks the court to “release” this automatic stay.

How Chapter 13 Bankruptcy Can Help

If  you’re behind on your mortgage payments with no feasible way to get current, the only way to keep your home is to file a Chapter 13 bankruptcy. This works IF you’re able to pay the regular payment. Then the arrears are added into the plan and paid over the life of the plan. In some jurisdictions, the judges and trustees ARE allowing the payment of only the HAMP determined payment to keep the mortgage loan current (and out of foreclosure.) The HAMP payment is only 31% of income and in many cases gives borrowers much needed relief.

Consider bankruptcy as a possibility for avoiding or stalling foreclosure

For more information and a free consultation with a lawyer who is versed in bankruptcy as a tool to stop foreclosure, please compete the form to the right.