Can Bankruptcy Stop Foreclosure?

You worked hard to buy your home, but what happens when you find that you are in jeopardy of losing it? It can be easy to fall behind on your mortgage payments. Whether you lost your job or simply have additional expenses, you may end up with a possible foreclosure. Last year alone, there were more than 27,000 foreclosures in Florida, and the rate is one of the highest in the country. Many people wonder if there is a way they can save their homes. You may have the option of filing bankruptcy to stall or end the foreclosure process. 

What is Foreclosure?

Foreclosure is the legal process that a mortgage lender utilizes to take back a home due to default. When you get a mortgage, you typically need to finance a large portion of the cost. The lender requires you to repay the loan on a schedule that is part of the contract. If you fail to repay the loan or get behind on payments, the bank can foreclose on the property and resell it as repayment for the loan. The lender must go through the proper process, which includes a demand letter, notice of default, and court approval to foreclose. 

What is an Automatic Stay?

An automatic stay is an injunction or legal action that prevents creditors from taking actions against you. U.S. bankruptcy law provides for an automatic stay. The court imposes a stay immediately when you file for bankruptcy. The stay protects you against debt collection while you go through bankruptcy. An automatic stay generally gives you up to several months of protection.  However, it is important to note that a creditor has the ability to seek relief against a stay. 

A creditor may file a motion with the court to lift the stay. If the court grants the motion it means that the automatic stay will not apply to this particular debt and you must still continue paying your loan. If granted, the foreclosure may continue. Keep in mind that even if the stay is lifted, you will still have a short amount of time to resolve the matter before foreclosure is complete. 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is also known as wage-earner’s plan because it allows people who are employed the ability to repay their debts. Under Chapter 13, you will be able to restructure and consolidate your debts and get onto a payment plan that you can afford. You may be able to repay the mortgage debt you have accumulated and save your home from foreclosure. 

When you structure repayment options, you must keep in mind that you will be repaying prior debt as well as continuing to pay your ongoing monthly mortgage payments in order to remain current. While you must repay your previous debts, you will have an extended time to do so, typically 3 to 5 years, depending on the situation. 

The decision to file bankruptcy is one that requires a great deal of information and thought. Your attorney will assist you in determining your available options so you can choose what best fits your needs. To learn more about bankruptcy, contact us at Adam Law Group at (904) 351-0743 to schedule a consultation.