Bankruptcy to Stop Foreclosure and Fix Mortgage Issues
Filing bankruptcy will halt foreclosure. Chapter 13 bankruptcy, provides powerful tools for resolving several common problems for mortgage borrowers. A chapter 13 plan can get you out of default and allow you to keep your home. Mortgage distress has long been among the leading reasons individuals file for bankruptcy. Many Americans have turned to bankruptcy to save their home.
The automatic stay imposed upon the filing of a bankruptcy petition halts any foreclosure process that is underway. The stay will continue to be in effect until the creditor is granted permission by the court to continue, or until the bankruptcy case is closed or dismissed. Under some circumstances, a debtor in North Carolina can reverse a recent foreclosure sale by filing bankruptcy within the 10-day redemption period. If a foreclosure sale has been complete on a property you wish to retain, the situation is very urgent, and you should contact an attorney without delay. While bankruptcy can be effective relatively late in the foreclosure process, filing bankruptcy earlier can reduce costs.
In chapter 13 bankruptcy, a debtor can cure a default over the course of the plan. What this means is that if there is a past due amount of payments and charges owed to a mortgage lender, giving them cause to foreclose, the debtor can repay this money over up to 5 years. Once cured, the lender can no longer foreclose since the borrowing contract has no longer been broken. Curing the default essentially unwinds the distress in the mortgage loan.
Addressing Second Mortgages
Second mortgages, including many home equity lines of credit, are treated somewhat differently than first mortgages. Most notably, if more money is owed on the first mortgage than the property is worth, the second mortgage can be treated as unsecured in a chapter 13 plan. This "strip off" of the junior mortgage results in the second mortgage holder receiving the same pro-rata payments as credit card lenders, which in some cases will be nothing at all. This treatment reflects the fact that if the house had been foreclosed, the second mortgage lender would not have been paid, as all of the home's value would have gone to pay the senior lender.
Orderly Release of Property
A borrower who has decided to abandon a mortgaged property will sometimes turn to bankruptcy to orderly release the property to the creditor. In some situations, this can be more definitive than simply walking away from the property. If more on the house is owed than it is it is worth, the bankruptcy can also prevent the mortgage lender from seeking the deficiency balance from the debtor in the future.
In some situations, there may be other means to address mortgage debt in bankruptcy. This may be due to the nature of the property use, the terms of the mortgage documents, the amount of payments remaining, or other factual or legal characteristics. If you have mortgage problems, set up a free attorney consultation today, and we will discuss with you all of your options under bankruptcy law.
Ready to learn more about how chapter 13 can help with your mortgage? Start your free bankruptcy evaluation now.