It may still be possible to save your house if you have fallen behind on your mortgage payments and are facing foreclosure. If saving your house is no longer an option, you may be able to postpone the foreclosure process and extend your time in the home without having to make any payments.
If your foreclosure sale is coming up in a matter of days, you may be able to stop it in its tracks by filing for bankruptcy. When you file a lawsuit, an automatic stay is put in place. The stay puts the foreclosure on hold while the bankruptcy is being processed. The lender could try to get around the automatic stay by filing a motion to lift the stay and asking the court for permission to proceed with the foreclosure. Even if the lender’s motion is granted, the foreclosure will almost certainly be postponed for at least one or two months, giving you time to find a foreclosure option.
You might be able to save your home by filing Chapter 13 bankruptcy. If you are unable to make your mortgage payments and are unable to keep your house, Chapter 7 bankruptcy may be able to assist you in making the most of the foreclosure process.
If you’re facing foreclosure, a Chapter 13 bankruptcy permits you to make up the mortgage arrears through your repayment plan (something a Chapter 7 bankruptcy does not allow). Chapter 13 bankruptcy may also help you save your home by lowering the amount of debt you have to repay, allowing you to put more money toward your mortgage.
You’ll have to offer a repayment plan if you file for Chapter 13 bankruptcy. If the court accepts your plan and you follow it for the requisite three to five years, your remaining unsecured debt will be forgiven, and you will be able to keep your house.
If you’re behind on your payments and facing foreclosure, Chapter 7 bankruptcy won’t help you. So, unless you can work out a deal with your lender outside of bankruptcy, you’re likely to lose your home. However, there are still advantages to filing for Chapter 7 bankruptcy. The most significant advantage is the postponement of foreclosure procedures. A delay will provide you additional time in your house, as well as the opportunity to save money (since you will not be making any mortgage payments during the wait) and negotiate a foreclosure alternative with your lender.
You’ll probably still lose your property, but you won’t be accountable for any leftover shortfall after the foreclosure if you file Chapter 7 bankruptcy.
The Consequences of Filing for Bankruptcy
Bankruptcy is a significant move that should be carefully examined. Most importantly, declaring bankruptcy might result in the loss of other valuable assets as well as a negative impact on your credit score. Keep in mind, however, that foreclosure will harm your credit score, and the benefits of bankruptcy (including the discharge of your mortgage and unsecured obligations) may outweigh any credit damage.
If you’re facing a judicial foreclosure, you’ve already had your chance to challenge the foreclosure in court by the time the foreclosure sale is scheduled. If you’re facing a non-judicial foreclosure (one that doesn’t go through the courts), you might be able to file a lawsuit at the last minute to slow or stop the foreclosure. But you can’t halt the process simply because you wish to spend more time at home. To fight foreclosure, you must have a legal justification or a valid argument that is founded on good faith. To win your case against your lender, you’ll have to show that the foreclosure should not have happened because the party foreclosing isn’t the owner of the mortgage note, the lender (or servicer) didn’t follow all of the legally required steps in the foreclosure process, or the lender (or servicer) made some other serious mistake.
The disadvantage of suing your lender is that it might be quite expensive. If a court does not believe your charges against the lender, your action will merely serve to postpone your foreclosure rather than stop it. Even a postponement of your foreclosure could be enough to persuade your lender to make an agreement with you.
While you can’t wait until the last minute before a foreclosure auction to apply for loss mitigation, you may be able to prevent or delay a foreclosure by doing so (an alternative to foreclosure).
If you deliver a complete loss mitigation application to the servicer (the company that handles the loan account on behalf of the lender) more than 37 days before a foreclosure sale, the servicer can’t ask a court for a foreclosure judgment or order of sale, or conduct a foreclosure sale, until:
Unless you’re able to work out a loan modification, applying for loss mitigation won’t provide you a lot of extra time.
In most cases, the servicer must make a decision on your application within 30 days, and the foreclosure can begin if any of the three elements listed above have been met. Furthermore, the servicer will not be required to assess numerous loss mitigation applications submitted by you. However, if you become current on your loan after submitting an application and then submit another, the servicer is required to consider it.
A few states also have statutes that prevent foreclosure if the borrower submits a loss mitigation application, some of which are more lenient than federal law.
PS: This is not a legal advice, please seek a professional. This is for informational purposes only.
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