Stopping a ForeclosureComments Off on Stopping a Foreclosure
Often times clients come in wanting to stop a foreclosure but state that they do not need to file a bankruptcy. This can be an incorrect statement. Whether working on a loan modification or just needing more time to get caught up on a mortgage payment, a bankruptcy can give you that much needed time.
Even if you have no other debt, the filing of the bankruptcy imposing is what is called an automatic stay. The automatic stay prevents collection of debt with a few exceptions. With the creditor unable to collect debt, that prevents a creditor from proceeding with the foreclosure sale because the purpose of the sale is to collect some of the money owed to them. With this, they are not allowed to do while the automatic stay of the bankruptcy protects you.
This same idea applies to repossession. If a client has a car that is pending repossession and the client wishes to retain the vehicle, the filing of a bankruptcy will prevent repossession. Sounds great right? It is, at least for a limit period of time. Depending on the type of bankruptcy that is filed, Chapter 7 or Chapter 13, the amount of time you are protected varies greatly.
A Chapter 7, while it will temporarily stop a foreclosure or repossession, will only give you as long as 4 months but likely must less than that. If you cannot get yourself current on mortgage and/or car payments, the foreclosure or repossession is inevitable. However, a Chapter 13 can give you extended protection assuming you are meeting the obligations of the Chapter 13. If done correctly, a Chapter 13 can give you 4-5 years to back the late payments on the home so long as you are continuing to make the ongoing mortgage payments as well. The Chapter 13 can also give you up to 5 years to pay off the remaining loan balance on the vehicle.