Legal Columns

BANKRUPTCY

My House is Being Foreclosed. Can I Protect My House if I File Bankruptcy Now? 08/18/2017

Bankruptcy and foreclosure are separate proceedings, yet often occur at the same time. If you end up in financial difficulty, you will most likely not be able to pay your mortgage or credit card debts. It is natural to think about filing bankruptcy if you cannot keep up with paying your mortgage or credit card debts. At the same time, banks and lenders will commence foreclosure actions against properties where mortgage payments are in arrears, and as such, bankruptcy and foreclosure are closely linked. Often when homes are being foreclosed, many think in error that if they file bankruptcy, they can keep the house. This is, of course, not necessarily the case. Rather, it is more a matter of when and how you have to move out of the house.

Many people obtain a mortgage in order to buy a house. If you fall behind on your monthly mortgage payments, the bank can and will often start the foreclosure process. The foreclosure process will usually start once you have missed several monthly payments, but that does not mean that you have to vacate your house immediately. The bank must send out a notice to you that it intends to initiate a foreclosure proceeding. At this point, bankruptcy is not necessarily the only solution. You might want to consider negotiating an extended payment plan to catch up on your arrearage, or selling your property through a short sale. Once you have considered all such viable alternatives, you may then want to consider filing bankruptcy.

An automatic stay will be put into place the moment you file bankruptcy, and all collection activities by creditors must cease. Foreclosure proceedings must also cease until such time that the bankruptcy process is completed. Depending on which state you live in, it usually takes anywhere between three to four months on average for a bankruptcy filing to be over. This means that you can continue to live in your house during this time. In cases where the debtor filing bankruptcy is going through financial hardship, this extended time period provides a moment of relief.

In certain cases, the bank will request the court to lift the automatic stay so that it can continue the foreclosure proceeding despite the debtor having filed bankruptcy. Various factors will determine whether this will be allowed, such as the amount of arrearage and the extent to which the foreclosure proceeding is already under way. Even if the court allows the automatic stay to be lifted, it usually takes around two months for the court to reach a decision, during which time you can remain in the house. In cases where you are about to be evicted after a foreclosure judgment, it is important to immediately seek the services of an attorney who is familiar with how to handle such situations.

Chapter 7 bankruptcy clear all debts and you will not be able to keep your house. However, a Chapter 13 bankruptcy, which includes a payment plan, may allow you to keep your house. Therefore, it is important to carefully consider which bankruptcy best suits your needs and objectives.

Sometimes, the lender may try to argue that the debtor simply filed the bankruptcy as a delay tactic to stall the foreclosure proceeding. Here, it is important for the bankruptcy attorney to focus on how best to represent the client’s needs. Moreover, the process of filing bankruptcy can bring about extreme stress and concerns for the client. By extending the foreclosure process by several months by taking appropriate legal measures, the experienced attorneys at Song Law Firm can give you some time and space to breathe easily during such turbulent times.

We offer free consultations and evaluations to assess your eligibility to file bankruptcy. If you have any questions about bankruptcy, please contact us at mail@songlawfirm.com.



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