If a foreclosure is looming on your horizon, there’s a chance that seeking out that chapter 7 bankruptcy lawyer in Boulder may ease your situation! You see, in some circumstances, filing for chapter 7 or chapter 13 bankruptcy can help you avoid or delay foreclosure, and this short guide will lay out some of the critical details you’ll need to know about the process.
First, it’s helpful to understand what foreclosure is so you know what you’re facing. When we’re talking about foreclosure, we’re talking about the legal process that a lender (the one who holds your mortgage) will use to seize your home and resell it, after you have failed to meet your repayment obligations for the property. The timeline for this varies by state, but in many cases, it’s triggered by you missing a specific number of monthly mortgage payments.
Where Bankruptcy Comes Into Play
So how does bankruptcy enter the picture? For both chapter 7 and chapter 13 filings, courts will issue an “automatic stay” order that informs your creditors to cease collections and foreclosure actions. This is a kind of immediate relief, and depending on the specific type of bankruptcy you’ve filed, there are a few ways that things might play out from here.
For instance, if you file for chapter 7 bankruptcy, the foreclosure process will, generally speaking, be delayed while your bankruptcy is pending (typically three to four months). Lenders, however, have the ability to ask the bankruptcy court to lift that automatic stay. If they’re successful with this motion, it would prevent you from using bankruptcy to delay foreclosure for the full length of the bankruptcy process. You’d still get some delay, though, as such a motion takes time to complete and can sometimes be met with delays.
Now, in the case of chapter 13 bankruptcies, there’s also the chance that you can work out a repayment plan that would allow you to keep your home. Unlike chapter 7 bankruptcies, chapter 13 bankruptcies last between three and five years, during which time you will be paying back a percentage of the debts you owe to your creditors.
So, that means the unpaid payments on your mortgage that you owe can be repaid over this period, provided you have the income to cover those along with the current mortgage payments that you owe. Fulfilling these obligations over the course of your chapter 13 bankruptcy period is, however, a method for avoiding foreclosure and keeping your home.
There are also situations wherein filing for chapter 13 bankruptcy can alleviate pressure from second or third mortgages as well, though it requires some particular circumstances to be fulfilled in order for the process to work in such a manner.
To recap, filing for bankruptcy initiates an automatic stay on foreclosure proceedings, which, in and of itself can help provide you with additional time (how much often depends on how aggressive your lender decides to get in pursuing the foreclosure).
With chapter 13 bankruptcies, you may have a chance to pay off what you owe over time, but you must do so while staying current with your present payment obligations on your property.
It’s important to stay aware of these options, and to assess your situation with a professional to ensure you’re taking the right course of action and doing what’s best for your financial situation.