Bankruptcy, mortgage payments and forestalling foreclosure
Are you struggling to make your monthly mortgage payments and wondering about facing an impending foreclosure? With the soaring debt obligations in the US, an increasingly large number of people are suffering from lack of cash and are unable to make payments on time on their mortgage loans.
By the time you feel that your foreclosure notice will arrive and you’ll have no other option but to lose your home ownership rights to the bank, you might just overlook the least-known option, bankruptcy! This is not a financial move that should be taken lightly and this may not jeopardize your chances of taking out a loan in future as most consumers think. In fact the homeowners who are unable to make their monthly mortgage payments can improve their credit by filing bankruptcy.
Though bankruptcy is not the best choice for anyone who is struggling to pay their monthly bills, sometimes it may work in accordance with the particular situation they are in. Typically, foreclosure takes place when a homeowner falls behind on the monthly mortgage payments and then the legal lender begins the process of selling off the home in an auction to recuperate the money. This doesn’t happen overnight and the lender won’t opt for foreclosure unless you’ve missed a number of your mortgage payments. But if you want to avoid losing your home ownership rights, filing bankruptcy may help you. Check out how.
Delaying foreclosure through the automatic stay: When you file either a Chapter 7 or Chapter 13, the court will actually issue an automatic stay order that will direct your creditor to stop all kinds of collection activities immediately without any excuses. If your home is scheduled for a foreclosure sale, this will be postponed as the bankruptcy will remain pending for the next 3-4 months. But there are 2 exceptions to this rule.
Foreclosure notice when already filed: The automatic stay of bankruptcy won’t stop the foreclosure on an advance notice. For instance, if you opt to sell your home in any state, the lender needs to give at least 3 months notice to the homeowner. If in such a situation, you get 3 months default notice and you file for bankruptcy when 2 months has already passed, the 3 month period will slip away when you’ve been in bankruptcy for one month. During this time, the lender could file a motion to lift the stay and carry on the foreclosure sale.
Motion to lift the stay: If the mortgage lender gets the permission of the bankruptcy court to proceed with the sale of the house, you may not get the 3-4 months. Even then, this may postpone the sale by at least 2-3 months.
If you file Chapter 13 bankruptcy, you can pay off the mortgage arrearage over the length of the repayment plan that you propose with the bankruptcy court. Therefore, when you want to avoid a foreclosure notice due to missed payments, you may think of filing bankruptcy.
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