I’m often asked what happens to your home after the foreclosure is stopped? There are usually two options:
Option One: A Chapter 7 Bankruptcy Buys You Some Time. It’s a Temporary Relief but Sometimes – All You Need.
A Chapter 7 “straight bankruptcy,” is the most common type. It can protect a home against foreclosure for up to a temporary period, usually minimum two to three months or less depending on the mortgage lender. Some times a lender will wait until the bankruptcy is finished before continuing with the foreclosure again – sometimes not. If you only need a short period of time you can:
1. Surrender the home and move out; or
2. Keep the home, and you can make up on the late payments within a very short time – usually less than a year.
3. Request a modification of your home loan in order to restructure your payments.
A Chapter 7 essentially allows some time to organize your delinquent mortgage debt. Depending on whether you intend to surrender your house or keep it, a Chapter 7 Bankruptcy allows time to work out arrangements with the mortgage lender.
Option Two: Chapter 13 Bankruptcy Can Buy Years of Time
A Chapter 13 filing can allow up to five years to make up delinquent payments with more flexibility and abilities.
Chapter 13 sets out a payment plan with more flexibility to get caught up on past mortgages. It can provide you time to catch up on any back property taxes and can eliminate a second mortgage or a judgment lien. In addition, a Chapter 13 is a more practical way of handling liens on your home. For example, income taxes or child support liens.
Chapter 13 Bankruptcy can be flexible. It provides flexibility in handling back payments due by allowing any changes or adjustments that may arise to be changed in your case thus making the ability to keep your real estate possible. You may also decide to surrender a property months or years later.
Keep in mind a mortgage lender has the ability to ask the bankruptcy court to restart a foreclosure. If the creditors disapprove of the Chapter 13 payment plan you and your attorney propose or if you fall behind on your plan payments down the road. The creditors can file a motion for relief from the automatic stay and the bankruptcy court, especially here in Riverside, will balance your right against lenders through a hearing.
If you have any questions regarding your home foreclosure, contact our Riverside Bankruptcy Attorney to discuss your options today.