Stop a Home Foreclosure with Chapter 7 or 13

The bankruptcy power called the “automatic stay”immediately stops a home foreclosurethe moment your bankruptcy is filed. What happens after that depends on whether you file a Chapter 7 or Chapter 13 case, and on what you want to accomplish.

Buy Some Time with Chapter 7

A Chapter 7 “straight bankruptcy” cancels an immediately pending foreclosure sale. Howeverit gives you limited tools with which to keep the home in the long run.

So, it’s appropriate in two situations:

1. You’ve decided to keep the home, and will be able to afford to catch up on the accrued missed payments within months.

   After filing a Chapter 7 case, most people experience an improvement in their monthly cash flow. Carefully calculate the amount you are behind on your mortgage. (You will likely need to add in extra costs like late fees, the mortgage lender’s attorney fees, foreclosure costs, and such.) Then see if you can afford to resume full regular monthly payments (including insurance and taxes, if appropriate), plus enough extra each month to bring you current within less than a year. The lender will likely let you enter into a “forbearance agreement,” agreeing that it won’t start (or re-start) a foreclosure as long as you keep to your payment agreement.

2. You’ve decided to surrender the house but have a foreclosure sale scheduled soon. So you just need a limited amount of time to prepare to move—a few extra weeks or maybe a few months.

   Filing Chapter 7 shortly before the foreclosure sale will stop the foreclosure auction of your home. The “automatic stay” preventing your mortgage lender from having a new foreclosure sale usually expires about three months after your Chapter 7 is filed, so you may have that much more time. But the lender can ask the bankruptcy court for permission to get “relief from stay” and resume foreclosure earlier. The court would likely allow this to happen as long as you are not intending to keep the house and aren’t making any payments. So, when timed right, Chapter 7 will buy some extra time, but no more than a few months.

Buy a Lot MoreTime with Chapter 13

A Chapter 13 imposes the same “automatic stay” to stop an approaching foreclosure sale as Chapter 7 does. But then it gives you much more time—up to five years—to catch up on your missed mortgagepayments (and late fees and any other accrued costs added to your arrearage). Chapter 13 can also make it cheaper to keep your home, and gives you some flexibility to deal with upcoming evolving circumstances.

Chapter 13 does not leave you at the mercy of your mortgage lender about how fast you must catch up on your arrears. In most cases you will be given the full length of your three-to-five-year plan to catch up. You do have to keep up diligently on your regular monthly mortgage payments, and on your catch-up payments.

Sometimes, especially when there is some equity in the property protecting the lender, there might be even more flexibility. For example, you may be allowed hold off paying some of the mortgage arrearage out of the proceeds of the intended future sale of the property.

Chapter 13 also can buy time to catch up on back property taxes. It may be able to “strip” a second mortgage off your title, or a “avoid” a judgment lien so that it is no longer secured against your home. These steps can result in you having more money to catch up on the first mortgage’s arrearage, and allow you to maintain the “automatic stay” protection from foreclosure until you complete your case. At its completion you would be current on the mortgage, and likely free and clear of all other debts.

Maximizing the benefit you get from bankruptcy protection for your home is a delicate task. CarrieWeir, with her 20 years of experience, can show you how to get the best use out Chapter 7 and 13 to meet your unique needs. If you are in the Dallas-Fort WorthMetroplexplease contact me to schedule your free and confidential consultation. Either call meat 972-772-3083 or use this this contact form. And thank you for reading my blog.

This is just a short sampling of the ways that Chapter 13 can help with some of your most important debts. Let me, bankruptcy lawyer Carrie Weir, show you how to put this toolbox of tools to work for you. contact meto discuss your options. Most of my clients live or work in and aroundRockwall, Heath, Greenville, Lavon, Wylie, Mesquite, Royse City, Sachse, or Rowlett, Texas. I can provide you a free and confidential consultation.If you want to contact me outside of business hours,you can