Many people default on their mortgages, and while some lenders are willing to make a deal or allow a short sale, most lenders do not. If the lender is unwilling to negotiate, they will likely initiate foreclosure as specified in the mortgage. Foreclosed homes are repossessed and sold at auction, with the proceeds paying the mortgage and any legal fees. Foreclosure is often delayed by two or three months, giving homeowners time to find alternatives. If a homeowner cannot find a way out of foreclosure, bankruptcy may be a viable option. Get in touch with Law Offices of Steven K. Brown.
Delaying Foreclosure with the Automatic Stay
“Foreclosure” and “bankruptcy” are words no homeowner wants to hear, but if you File Bankruptcy in St. Louis, you may be able to remain in your home. Once you file either Chapter 7 or Chapter 13, the court issues an order for relief, which requires creditors to stop all collection attempts.
Using Chapter 13 to Your Advantage
In a Chapter 13 case, you and the court will make a plan to pay your debts over time. However, you’ll need to be able to make your plan payments while still paying your mortgage. If you can do so, you’ll keep your home out of foreclosure. Chapter 13 can help to eliminate second and third mortgage payments; the debt is recategorized as unsecured. If your first mortgage is backed by your home’s entire value, there’s no equity left to secure subsequent mortgages.
Staying out of Foreclosure with Chapter 7
In a Chapter 7 bankruptcy, all the debt secured by your home’s equity is canceled. However, Chapter 7 takes it a step further, forgiving homeowners for tax liabilities incurred by lenders as a result of the default. The law applies to previous tax years, but does not cancel tax liability if the home loan wasn’t a mortgage or was not used to improve the property.
A Word of Caution
Even if you take advantage of Chapter 7, it won’t keep you out of foreclosure. When you sign for a mortgage, you agree to use your home’s value as collateral if you default. Chapter 13 lets you stop that action long enough to catch up on payments, but Chapter 7 does not cancel the loan. A bankruptcy attorney with can help you decide the best course of action, and work to keep you in your home.