Is a Foreclosure in Your Future? Suspend It, or Even Stop It With Bankruptcy.

When you file for either Chapter 7 or Chapter 13 bankruptcy, something called the “automatic stay” takes effect immediately. This grants you powerful protection against any attempts by your creditors to collect on what they are owed. This protection lasts until the completion of your bankruptcy. At that point, any debts that were eliminated in your bankruptcy will simply disappear. Any creditor whose debt survives your bankruptcy can again attempt to collect on the debt.

If you fall behind on your mortgage, the bank can begin the steps necessary to foreclose on your home. You will be given notice of their intent to foreclose upon your home in the mail. As soon as you receive this notice of a potential foreclosure, it is wise to contact an experienced bankruptcy attorney to discuss your options, especially if you feel you will not be able to catch up on the payments and make them current.

The key to filing bankruptcy and halting your foreclosure is beating the bank to the punch. A date for the conclusion of the foreclosure process, typically through a “trustee sale,” will be established at some point after your bank initiates the foreclosure. This is the date you want to watch for. Your bankruptcy, and therefore, your automatic stay, must take effect before this date.

In the case of a Chapter 7 bankruptcy, your bank is allowed to respond to the automatic stay with a motioned filed in bankruptcy court. If the motion is granted (and it typically is), they will be able to lift the protection of the automatic stay. But, by filing your bankruptcy, you have at least delayed the foreclosure by a few months. This will give you time to either get current on your mortgage payments, or delay having to move out of your home.

If you are filing a Chapter 13 bankruptcy, you will be allowed to keep your home even while behind on the mortgage. The amount you’re behind can be included in your Chapter 13 monthly payment plan and be spread across the three to five years your bankruptcy will last.

By filing bankruptcy, you may also be able to “strip” the lien of a second or third mortgage from your home, depending on how much you owe and how much your home is worth. If the strip is successful, you will no longer owe anything on your home except for the first mortgage.

You can contact an experienced bankruptcy attorney at Meyer Law for a free consultation. We have six convenient locations in Arizona: Phoenix, Gilbert, Glendale, Peoria, Scottsdale, and Mesa.