If you’ve received a notice of foreclosure, filing for bankruptcy
may give you the best chance at keeping your home or slowing down the
foreclosure proceedings to get current on your home. Here’s what
you need to know.
When you file for bankruptcy, an automatic stay is enacted and a freeze
is placed on all collection efforts, including foreclosure. If a creditor
tries to collect debts, repossess a car or foreclose on a property, they
are violating federal laws and could face sanctions. However, an automatic
stay only lasts for a certain amount of time, depending on which type
of bankruptcy you file.
Chapter 7 Bankruptcy & Foreclosure
Unfortunately, a Chapter 7 bankruptcy typically means you will ultimately
end up losing your house. The only way you can keep your home is by getting current on your mortgage,
but people that usually file for Chapter 7 cannot do that. The good news
is that filing for Chapter 7 before the foreclosure allows you to keep
it off your credit, and any potential deficiency balances from the foreclosure
are wiped out. In addition, filing for Chapter 7 bankruptcy makes the
foreclosure process start back over, giving you another three months or
longer in the house. You can use this time to live there mortgage-free
and save money for your next place. Chapter 7 bankruptcy will wipe out
most unsecured debt, such as credit cards, medical bills and personal
loans. Under extremely rare circumstances, the bank may be willing to
work something out with you in order to keep your home, but it doesn’t
happen very often.
Chapter 13 Bankruptcy & Foreclosure
On the other hand, if you want to keep your house and get on a repayment
plan, Chapter 13 bankruptcy might just be for you. This type of bankruptcy reorganizes your debts and allows you to get assistance
on paying back what you owe on your house. Typically, repayment plans
last roughly 5 years, allowing you to make low monthly payments on your
home and a portion of unsecured debts. At the end of Chapter 13, you could
potentially save your home and pay back your unsecured debts.
If you’re facing foreclosure or are considering filing for bankruptcy, contact
our Longmont bankruptcy lawyers at Jorgensen, Brownell & Pepin, P.C. today.
Call (720) 809-8310 or contact us online
for more information about our services.