Can Bankruptcy Solve Home Mortgage Problems?
Provided by HG.org
Home mortgage problems often lead to default and foreclosure of the property the individual is attempting to purchase. While bankruptcy may be the last resort to solve any financial difficulty, some homeowners seek this process to try to stop a foreclosure from taking the home away.
Bankruptcy often erases most or all the debts of the borrower in certain situations. However, many of these individuals need to relinquish items that are behind in payments. This could include vehicles and homes. Bankruptcy may provide the means to retain the home if specific processes followed by the homeowner occur. This usually requires research and communication with an expert in these matters. A real estate or lawyer versed in mortgages may be most helpful. Advice and additional information online could assist the person in finding another qualified to assist. It is critical that the applicant filing bankruptcy does not fail to disclose all income and revenue from various sources.
An Order of Relief issued by the courts through a Chapter 13 or 7 may ensure the home is not taken from the individual. This provides an automatic stay that stops creditors from seizing assets such as property and the land. Any foreclosure sales may not proceed without a court order. This protects the borrower from the final sale. For those behind enough in a mortgage, this could prevent foreclosure processes starting. The bankruptcy needs to finalize before creditors attempt to seize any property or real estate. However, the procedure usually ends these attempts or ensures that the loans are taken care of by the bankruptcy agent.
The Type of Bankruptcy and the Mortgage
While filing bankruptcy with a mortgage that is overdue or entering into foreclosure territory may halt the proceedings, it is important that the right bankruptcy process starts. The Chapter 7 is necessary for individuals or couples that do not possess enough disposable income to pay off debts. This procedure is the usual one used by the average consumer in the United States.
The Chapter 13 is for those with disposable income that could pay off at least some debts. There are tests that may measure which is the correct path to take. However, an agent is usually part of the process and may explain certain matters. These methods take months in usual situations of Chapter 7 and three to five years for Chapter 13. If the individual owns a business, the debts related to the bankruptcy may call for a Chapter 11.
Some complications arise through using bankruptcy to stave off the possible foreclosures. The debt collector may file a Motion to Lift the Stay. This will stop any measures taken to keep lenders from seizing assets due to unpaid loans, debts and mortgages. The bankruptcy procedure may stop these creditors for two or more months, but if the bankruptcy is not complete by then, financial institutions may proceed. It is crucial to proceed with the bankruptcy agency quickly to keep the home from sale through foreclosure. Additionally, the individual going through bankruptcy needs to ensure he or she keeps the house after the process completes.
Solving the Mortgage Problems
Once the homeowner has found the solution in the type of Chapter bankruptcy process, he or she may have a way to solve mortgage problems. The stopgap measure is the first step in this method. This effectively halts any seizure of property from creditors as well as phone calls for payments. Once the bankruptcy starts this, the homeowner may initiate a way to pay off the backed-up mortgage payments. Working closely with the bankruptcy agency, he or she usually has a few months before the monies must transfer to the creditor or bank financing the mortgage.
Chapter 13 will assist the homeowner in setting up a payment plan that creates a method to stop any foreclosures. When the property is part of the estate of the applicant, Chapter 7 will cancel all debts with the mortgage company. This may necessitate a new deal, but previous debts are either entirely wiped out or minimized for the individual. This provides an opportunity to move into the future with a clearer conscious and fewer debts.
Legal Support for Mortgage Problems through Bankruptcy
The lawyer hired for situations where a mortgage could lead to foreclosure may explain what type of bankruptcy is necessary. If other solutions are available, he or she may suggest these. However, the primary goal is to ensure the homeowner’s rights are not violated.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.