Foreclosure on your home is a traumatic event that, unfortunately, many Americans are faced with every day. The loss of a reliable source of income or some other cause of financial hardship can render a person incapable of saving their property when the mortgage is in serious arrears. For many, bankruptcy often provides a way to retain their property and alleviate their debt burden. It is worth considering before you give up and allow your home to revert to the bank or mortgage holder.
Chapter 13 Bankruptcy and Foreclosure
In Chapter 13 Bankruptcy you enter into a repayment plan to pay off past-due mortgage payments. To do this, you must have enough income to make payments on the past due amount, as well as paying your current mortgage payments, at the same time. The Plan gives you three to five years to pay the mortgage arrears in full. Staying current on all of the required payments for the duration of the repayment plan will allow you to avoid foreclosure and remain in your home.
Second Mortgage Payments
There might be options to deal with second or even a third mortgages. If there is no equity in the house beyond the first mortgage, second or third mortgages and home equity lines of credit (HELOC) can become part of your unsecured debt and could be paid less then what is owed on them. At the end of the repayment period, any remaining loan amounts on some of the second and third mortgages are discharged completely. This is why many people facing bankruptcy foreclosure choose Chapter 13 bankruptcy.
Foreclosure and the Order for Relief
An Order for Relief is a court order that puts a halt to creditors pursuing further foreclosure action once Chapter 13 bankruptcy is filed. This order grants you an Automatic Stay directing creditors to immediately cease their collection attempts while the bankruptcy is pending. If a foreclosure sale has been scheduled for your home, by law it must be postponed until the bankruptcy is finalized. However, there are two exceptions:
1. Motion to Lift the Stay
Lenders are entitled to file a motion to “Lift the Stay”, in which they petition the bankruptcy court for permission to continue with the foreclosure proceedings. If you are proposing to keep the house and catch up on mortgage arrears while making current payments, the Court is very unlikely to allow the mortgage company to proceed with foreclosure. An experienced bankruptcy attorney will be able to advise you if there is a risk of stay relief motion being granted and what that would mean in your case.
2. Foreclosure Filed Before Bankruptcy
Lenders are required to give homeowners advance notice, usually 90 days, before starting foreclosure proceedings on their home. In some cases, the lender could file a motion asking the court’s permission to proceed with scheduling the foreclosure sale. An experienced bankruptcy attorney can explain the foreclosure process and advise you on when to file to be able to save your house.
Chapter 7 Bankruptcy
Chapter 7 will not prevent the foreclosure on your home. While debts that are secured by your home, such as home equity loans, are canceled, you will probably still lose your home if you are behind on payments.
When you are facing bankruptcy foreclosure in Kansas and have fallen behind on your home mortgage, you can catch up on all the missed payments when you file Chapter 13 bankruptcy. Chapter 13 enables you to propose a plan to bring your payments current and keep your home. You can file bankruptcy at any time during
foreclosure process but before the
sale date to stop the sale. As every case is different, you should consult with a bankruptcy attorney and look at all your options for filing Chapter 13 bankruptcy.
Coons & Crump, LLC
Kansas Bankruptcy Attorneys
Lawrence: 785-856-87720 – Overland Park: 913-353-4044 – Topeka: 785-783-2360
American Bar Association, Kansas Bar Association, Kansas City Bar Association,
National Association of Consumer Bankruptcy Attorneys, Topeka Area Bankruptcy Council.