Many people contemplating filing for a Chapter 7 bankruptcy worry that they may not be able to save their home.
Our Denver bankruptcy attorneys know, however, that the truth of the matter is bankruptcy is often one of your only options for saving your home.
While it’s not going to be the solution for everyone, there are many people who can benefit. Consulting with an experienced bankruptcy lawyer is the only way to know for sure, but here are some thoughts to help you as you weigh your options:
A bankruptcy will halt a foreclosure proceeding. It will effectively end the creditor harassment. This gives you time to reorganize your finances and in some instances, catch up on your missed or late payments.
It’s generally going to be one of the best options for you to explore if you are behind on your payments but you still have ongoing and steady income.
In fact, a lender can’t foreclose or even try to collect debt from you once you’ve filed. A Chapter 7 will delay the foreclosure. It may also help you to ward it off altogether by freeing you from other debt so that you have the means to be able to pay your mortgage.
Another possibility is filing for a Chapter 13 bankruptcy. This option allows you time to fix your finances, usually within the course of three to five years. In this scenarios, the court will set an income-based budget with monthly payments handled by the bankruptcy trustees.
These trustees in turn pay those bills, first attacking the secured debt. Then, they focus on unsecured debt, starting with any back taxes you owe. After that comes debts such as medical bills and credit cards. After that, trustees will pay the remaining bills, usually for a few cents on the dollar.
If borrowers are able to keep up with those payments, they can usually come out of a bankruptcy with their home still in their possession.
What the court generally can’t do is reduce your mortgage debt down to what the home is actually worth (a big concern for the many homeowners who are underwater) or lower interest rates or loan terms.
However, given some recent financial settlements finalized to hold some of the largest banks accountable for foreclosure abuses, there may be some additional remedies you may seek in terms of loan modification.