If You Are A Homeowner Facing Foreclosure

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foreclosure-home-sale-signIf you are facing foreclosure, bankruptcy might be able to help. A Chapter 13 bankruptcy can provide an effective solution to enable you to keep your home.

What is Foreclosure?

Foreclosure is the legal process the lender must go through in order to take over ownership of a property after the homeowner falls behind on mortgage payments. The process involves numerous steps, and takes several months. The lender is required to notify you when the foreclosure process is initiated, and due to the length of the process you will still have time to consult with an attorney after a foreclosure is begun to see if Chapter 13 is a good option to keep you in your home.

How Chapter 13 Works

Chapter 13 bankruptcy lets you pay off the “arrearage” (late unpaid payments) over the length of a repayment plan you propose—up to five years. But you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home.

2nd and 3rd Mortgage Payments

Chapter 13 may also help you eliminate the payments on your second or third mortgage. That’s because, if your first mortgage is secured by the entire value of your home (which is possible if the home has dropped in value), you may no longer have any equity with which to secure the later mortgages. That allows the Chapter 13 court to “strip off” the second and third mortgages and reclassify them as unsecured debt -which, under Chapter 13, takes last priority and often does not have to be paid back at all.

Chapter 7 Bankruptcy and Foreclosure

While a Chapter 7 bankruptcy will not assist you in saving a home if you are behind on payments, during a Chapter 7 bankruptcy, you can live in your home for free during at least some of the months while your bankruptcy is pending–and perhaps several more after your case is closed. You can then use that money to help secure a new residence. In addition, Chapter 7 bankruptcy will also cancel all the debt that is secured by your home, including the mortgage, as well as any second mortgages and home equity loans. You will be able to emerge from the foreclosure debt free with a fresh start.

If you are a homeowner facing foreclosure, the Bankruptcy Law Center can provide help. Attorney Kristie Radloff and Attorney James Stanek are experts in helping homeowners stay in their homes. If you need to stop a foreclosure in Wisconsin, call the Bankruptcy Law Center at 414-257-1900 today.

Photo by BasicGov from Flickr using Creative Commons license.

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