Filing Bankruptcy To Stop Foreclosure

If you are considering filing bankruptcy to stop foreclosure, there are plenty of things that you need to take into your careful consideration. You may be at risk of losing your home through foreclosure if you are unable to catch up with the mortgage payments that you already have fallen behind on. If you are going through some kind of financial hardship and finding it difficulty to make the monthly payments toward your mortgage in a timely manner, the best thing to do is to contact your lender and discuss your situation with them. You can request them to restructure the payment plan so that you can continue making the payments conveniently. For example, if you are going through a temporary financial crisis, you can request them to accept only interest payments for a couple of months before you can start making the regular payments. If it is a long-term crisis, you can request them to increase the repayment period, which will eventually reduce the monthly payments. In most cases, if your case is a genuine one and if you are able to convince the lenders, such requests are usually approved. However, in some extreme cases, none of the strategies may work and you may be on the verge of losing your home to foreclosure. In such cases, you may have to consider applying for bankruptcy protection. Following is a brief rundown on how to go about it.

Decide Which Type Of Bankruptcy Is Right For You

When it comes to filing bankruptcy to stop foreclosure, the first thing you have to do is to decide whether you are eligible to file your petition under chapter 7 or chapter 13 of the bankruptcy code. It is not a matter of choice though. There are certain eligibility criteria that you have to meet in order to qualify for a particular type of bankruptcy. With the introduction of the new laws in the year 2005, it is now mandatory for the debtors (the petitioners) to pass a means test and to get a certificate from a government-approved credit counselor. If your monthly income (after deducting the necessary expenses) is less than the median income of the state you are living in and even the credit counselor approves that you are going through extreme financial hardship and there is no way you can afford the payments, you will have no other options but to file bankruptcy under chapter 7.

Automatic Stay

Filing bankruptcy to stop foreclosure always works, at least temporarily, because as soon as you file your petition, an Order for Relief is issued by the court, which includes an “Automatic Stay”, which means your lenders cannot make attempts to collect their debts any longer until a final judgment comes out for your case. Foreclosure is a part of the collection activities by your mortgage lenders. This way, now that the automatic stay is in place, even your mortgage lenders will have to wait for a final judgment in your bankruptcy case. They will be legally forced to stop the foreclosure sale even if it has already been scheduled. The bankruptcy case usually takes somewhere around two to four months before a final judgment comes in.

Legal Representation

Considering the very fact that filing bankruptcy to stop foreclosure can be a complicated process because of the legal technicalities involved with it, it is always wise to have a professional experienced lawyer represent you in the court. Make sure that the bankruptcy attorney you are hiring is duly licensed to handle such cases in your state. Besides that, the lawyer must also be specialized in handling the cases similar to yours. Their past record also matters a lot. You can check their past records by contacting the Better Business Bureau (BBB). If the lawyer is not listed with the BBB, do not sign up with them. Most importantly, you must carefully review the amount of fees they charge and the kind of payment structure they offer. You will have to make sure that there are no hidden clauses and that you can afford their fee. Besides all that, the best bankruptcy attorney is the one who also specializes in suggesting alternative ways to bankruptcy. When you approach a lawyer and they straightaway start talking about how to move ahead with your bankruptcy case, it means they either not honest or not an experienced lawyer. A reputable, experienced attorney will always try to suggest you a couple of alternative ways to go for in order to avoid bankruptcy. They may even be able to show you a way to stop foreclosure and save your home without needing to file for bankruptcy. Therefore, you must be very careful while you are looking out for the right attorney for your case. Always remember, you have to hire a lawyer before filing the petition, not after you already have filed the petition. Let your lawyer help you decide whether filing bankruptcy is the right option for the kind of situation you are in.

Protection Under Chapter 7

If you are filing bankruptcy to stop foreclosure under chapter 7 of the bankruptcy code, you will get an opportunity to discharge most of your debts, but it will also cause liquidation of most of your assets and properties (except the ones that exempted). However, the laws allow you an option to keep some of the properties, including home, if you convince the court that you are financially capable enough to continue making the payments toward the same. This can be a very complicated thing to prove in the court because you are already behind the payments and in fact this is the main reason why you are filing for bankruptcy protection.

Protection Under Chapter 13

If you are considering filing bankruptcy to stop foreclosure, chapter 13 bankruptcy can provide you better protection, as it allows you to keep your home if you agree to make payments toward your mortgage loan as per a new payment plan, which is usually designed based on your specific financial position (something you can afford).

Overall, the decision regarding filing bankruptcy to stop foreclosure is not an easy one. There are several factors that you need to look into. Besides that, assistance and guidance from an experienced lawyer is also crucial to help you make an informed decision in this regard.

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