Can Bankruptcy Help Me with Foreclosure?

Yes. Bankruptcy is a good tool that can help with foreclosure or even allow you to avoid it altogether.

Foreclosure is the legal process in which a lender (usually a mortgage company) sells a home at auction in order to get payment for the loan.  Foreclosure typically occurs after a homeowner falls behind on mortgage payments.  The process involves many steps, including notification to the homeowner.  Once a homeowner has been notified by the lender of pending foreclosure, it is a good time to consider bankruptcy as a possibility for avoiding foreclosure or stalling the process. There are several ways that filing for bankruptcy can possibly help you.

When you file either a Chapter 7 or Chapter 13 bankruptcy, the court automatically issues an order for relief that includes the “automatic stay.” The automatic stay stops all of your creditors from continuing any collection activities, including foreclosure. This means if your home is scheduled for a foreclosure sale, the sale will be legally postponed while the bankruptcy is pending.  The automatic stay is a powerful tool that, in many cases, can delay a foreclosure for several months.  Filing for Chapter 7 bankruptcy cannot prevent but can delay foreclosure. It can also eliminate the possibility of owing money after a foreclosure (if, for instance, the home sells for less than the amount owed.)

Filing for Chapter 13 can help you retain your home and avoid having it sold at a foreclosure auction.

For many people who are behind on mortgage payments, filing for Chapter 13 bankruptcy is the only way for them to keep their homes.  Chapter 13 bankruptcy allows them to pay off the “arrearage” (late or unpaid payments) over the course of a  three to five year plan.  To file for Chapter 13 you must demonstrate the you have sufficient income to meet your current mortgage payment and make additional payments on arrearages. Assuming you make all the required payments under your plan, you will avoid foreclosure and keep your home.  Chapter 13 may also help you eliminate or “strip off” the lien on your second or third mortgage.

At Kight Law Office, we help people who are facing foreclosure in Asheville, Waynesville, Hendersonville, Sylva, Franklin, Murphy, Highlands, Cashiers, Marshall, Mars Hill, Burnsville, Black Mountain, Flat Rock, Bryson City, Cherokee, and throughout western North Carolina.