Bankruptcy Stops Foreclosure

Bankruptcy Stops Foreclosure

A foreclosure is stressful and complicated.  You only have a short time to decide whether you want to get rid of your home or save it.  The decision to get rid of your home is extremely difficult. In order to make that decision you need to know your options.

An experienced bankruptcy attorney can help you understand what your options are and how to make the most of those options.

Saving Your Home From Foreclosure: If your house is in foreclosure with a bankruptcy filing, you can still save it. If you want to keep your home, you must file a chapter 13 bankruptcy.

  • Chapter 13 allows you to catch up on your house payments.  The bank is required to let you catch up on your payments through the bankruptcy.  If you file a chapter 13, the bank must adhere to the chapter 13 plan that your bankruptcy attorney drafts.
  • Chapter 13 plan payments are affordable.  You must makeup all of your missed mortgage payments, but you do not have to pay unsecured creditors in full.  That means that the credit card companies, the medical bills, and the collection agencies may only get paid pennies on the dollar; and you will get a full discharge on those debts at the end of the bankruptcy.

When You Can’t Afford To Keep Your House: Chapter 7 bankruptcy stops foreclosure long enough for you to find a new place to live and save some money for the money.  Most people who just need a little more time before the foreclosure file a chapter 7 bankruptcy.

  • Bankruptcy gives you time to find a new place to live.  The automatic stay goes into effect as soon as you file bankruptcy.  That means that as soon as you file bankruptcy, the bank has to suspend the foreclosure proceedings.  If you are getting rid of your house, the bank must get permission from the court to restart foreclosure.  This buys you extra time.
  • No deficiency judgments.  If you have more than one mortgage on your house, then you could be liable for a deficiency after foreclosure.  Bankruptcy prevents that from happening.  The bankruptcy completely discharges all of your mortgage debts and prevents a deficiency judgment.
  • Get your finances in order.  Most people heading into a foreclosure have lots of debt.  This can make it hard to rent a new place to live after the foreclosure.  If you file bankruptcy before the foreclosure, then you can get your credit report cleaned up before you need to find a new place to live.
  • No tax liability on second homes.  If you have a rental property or a vacation property that is being foreclosed upon, then you could be taxed on cancellation of debt income.  Filing bankruptcy before the foreclosure, discharges the mortgage debt through the bankruptcy, and the bankruptcy discharge is nontaxable.

Reducing Mortgage Payments: If you have more than one mortgage on your primary residence, you can get rid of the additional mortgages.  These are very fact specific cases and you should call to learn about your options. I will look at your mortgages and determine if any are eligible to be gotten rid of through a process called lien stripping. Lien stripping is done through a chapter 13 bankruptcy.  Because of the decline in Seattle metro area home prices, many of my chapter 13 bankruptcy clients are eligible to have junior liens removed.

Contact the Law Office of David H. Fuller, a Seattle bankruptcy attorney, for your free consultation.

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