How Bankruptcy Can Stop Your Home’s Foreclosure

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The heart is at home. Your home is your most valuable financial asset. It is also likely to be filled with family memories. It is not uncommon for people to have difficulty paying their mortgage payments during tough economic times and to be forced to leave their homes. Learn how bankruptcy can help homeowners delay or prevent foreclosure.

Chapter 13 Foreclosure and Bankruptcy

Chapter 13 bankruptcy allows the debtor to agree to pay off a portion or all of their debts in monthly installments over a specified time period, usually around five years. The process is closely monitored by a bankruptcy trustee. A skilled bankruptcy lawyer will help you make sound decisions and ensure that your rights are fully protected throughout the process.

Sometimes, Chapter 13 bankruptcy is able to erase second and third mortgages. Imagine that your home is worth $150,000 and that your first mortgage balance exceeds $150,000. This is commonly known as being upside-down or underwater. Your second and third mortgages, or HELOCs, are unsecured by the actual property value. 

Chapter 7 Foreclosure and Bankruptcy

Chapter 7 bankruptcy allows the debtor to pay down his or her assets using the proceeds from the sale of exempt assets. The foreclosure process can be delayed for up to four months in this instance. The foreclosure process can resume once the stay has been lifted. The debtor has the option of either finding money to pay off the mortgage or looking for a new home during the four-month delay. The bankruptcy filers can still live in their homes for four months.

Sometimes it is possible to save your home while avoiding foreclosure under Chapter 7 bankruptcy. The bankruptcy courts will consider the equity in your home as well as your history of repaying your mortgage payments. The bankruptcy courts can also request that the lender foreclose even if you file for bankruptcy. The time it takes to find a new home will be cut if the request is granted.

This post was written by Trey Wright, one of the best bankruptcy lawyers in Tallahassee! Trey is one of the founding partners of https://brunerwright.com/, specializing in bankruptcy law, estate planning, and business litigation.

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