It is a scary scenario more and more Americans are facing. The rate of foreclosure on properties in the United States is growing at an unprecedented pace. As the world continues to loom in a global recession, some find themselves battling with lenders in an effort to save their homes and wondering, " Can bankruptcy stop foreclosure?"
The good news is, there is bankruptcy protection available to homeowners who are struggling to make ends meet. Chapter 13 bankruptcy is a legal procedure that essentially reorganizes an individual's debts in a way that makes them more reasonable to handle. Most of these debts are repaid - usually at a reduced rate - to a trustee over the course of two to three years. Large and exempt debts such as student loans, taxes, alimony, and mortgages can be worked into the repayment plan, but continue much longer.
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Chapter 13 bankruptcy isn't for everyone. However, it can serve as a powerful tool when it comes down to saving a home. In most cases, once an individual files for Chapter 13 protection, a stay is ordered to temporarily halt any foreclosure proceedings. This automatic stay prevents the foreclosure of the home and also stops any collection actions that may be taken against the debtor. This stay is effective regardless of what stage the foreclosure is in. With the stay in place, the homeowner and attorney can map out a plan to save the property.
It is very important to note that anyone can file for bankruptcy without the assistance of an attorney. This, however, is not advisable, especially if a home is part of the debt. An attorney is much better suited to take the necessary steps needed to save the house from foreclosure. While hiring an attorney might be a financial burden, specifically for someone who is already having problems with paying the bills, it is well worth the expense.
The debtor has 15 days from the time of the bankruptcy petition to file a proposed payment plan detailing his or her income and living expenses. Once the petition has been filed and the repayment plan accepted, the debtor must pay the trustee on time every month for the duration of the payment plan. Failure to pay the trustee can result in termination of bankruptcy protection.
In addition, the homeowner is responsible for making on-time payments to the mortgage company. If at anytime the debtor falls behind in payments, the court has the ability to lift the automatic stay thus permitting the mortgage company to move forward with the foreclosure process.
During the bankruptcy payment plan, the debtor must catch up on all past due payments. With the reduction of absence of other debts (credit card, car, etc.), the homeowner usually finds he or she has the ability to make these payments and catch up. It may also be possible to refinance the home after the repayment period in an effort to lower future payments.
If you are behind on mortgage payments and afraid of what the future might bring, contact an attorney today to find out how bankruptcy protection can prevent foreclosure.
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