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Understanding What a Chapter 7 Bankruptcy Can Do For Foreclosure

chapter 7 bankruptcy foreclosure

Dec,27,2017

By:Mike Cibik

 

Understanding What a Chapter 7 Bankruptcy Can Do For Foreclosure

 

Delay in making mortgage payments can lead to you losing your home. Your bank waste no time in claiming your property that is so close to your heart. Yet, there is no need to panic as of now because there are various ways you can try and protect your home.

 

At the same time, you also need to be clear about certain processes, bankruptcy, for example.

 

There are many people who assume that opting for Chapter 7 Bankruptcy will help them in foreclosure, but that is far from true. Of course, there are some ways it could help.  Let’s understand the terms.

 

Understanding Foreclosure and Chapter 7

Generally, if you miss a couple of payments, the lender will generally not act on it, but if there have been more than a few, then, you could be at a risk of foreclosure. If you are still unable to pay after they have sent you a notice or reminder, then the lender or the bank may apply for a sale of the house. The actual procedure depends on the state and its laws.

 

Under Chapter 7, if you think you will avoid the foreclosure process; that might not happen.  Since the procedure may take some time, you will get some leeway to opt for alternative solutions.

 

You can discuss with your attorney on the options that you can avail. You should also note that Chapter 7 will only temporarily halt foreclosure.

 

Points to note about how Chapter 7 can affect foreclosure

  • Each case is different. How Chapter 7 would influence foreclosure actually depends on the type of loan, the mortgage and the payment scenario.  Don’t take chances by trying to do it yourself, an experienced lawyer can help you with practical and helpful bankruptcy tips in making a better decision.

 

  • If a mortgage payment is more than the cost of the house; in that case, the mortgage payment wouldn’t be reduced. With Chapter 7 you will also not be able to prolong your loan period and neither can the interest rates be brought down.

 

  • What Chapter 7 can do is get a stay in the foreclosure process. The lender or the bank will be forced to stop any action. And that gives you enough time until the end of the case.

 

  • If you have been lagging behind in your mortgage payments, then there is an issue. Chapter 7 can give you protection on the loan but eventually, it does not have the authority to stop the bank or the lender from going ahead with foreclosure at their convenience.

 

  • Chapter 7 can help you reduce debt-to-income ratio which means you can get help in loan modifications. If all other debts are eliminated, then you should be left with enough funds

 

  • You also have the option to challenge the mortgage in case if you have a valid reason to think that there are discrepancies.

 

  • When you file for Chapter 7, there are two options that you can think of. One is reaffirming your mortgage and second, renegotiating your mortgage. In both cases, you should be ready to clear your unsecured debt.

 

With reaffirmation of your mortgage, you will only have your original mortgage and you can relax as there will be no other debt. This means you can now start paying your mortgage. This again, as mentioned before, will work only if your due payments are not significant.

 

If there are too many missed payments, then the lender or the bank will want to go ahead with the foreclosure once the bankruptcy case gets over. But if you can pay off the pending dues, then you will have a chance to save your home.

 

With renegotiation of your mortgage, you allow the foreclosure but only if the lender or the bank does not decrease your principal or your interest.

 

In brief, you are seeking your mortgage option to be more affordable. This can also be done before you file for Chapter 7, but if the debt is too high and if you are not in a position to pay off, then you should file for bankruptcy first and then look at refinancing options.

 

 

Since each case is different, you should consult with a bankruptcy lawyer with expertise in this area, who can offer valid bankruptcy advice and suggest measures to help you. If you’re considering filing for Chapter 7, before you do it, give us a call for a free consultation at 215-735-1060.

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