Questions about Bankruptcy and Foreclosure
If you’ve fallen behind on mortgage payments and are facing foreclosure , bankruptcy may help you keep your home. The process can help stop debt collectors, slow down foreclosure proceedings and give borrowers more time to work out details related to their finances. In most cases, bankruptcy can help you make missed payments while giving you additional time to reorganize your finances.
Consumers considering bankruptcy as an option to help them keep their home during foreclosure may ask the following questions:
When I file bankruptcy what happens to my mortgage?
This will depend on the bankruptcy chapter filed. Both chapters have exemptions that allow you to keep certain assets and property. In Chapter 7 bankruptcy , if you are current on your mortgage you should be able to reaffirm the debt. In a Chapter 13 bankruptcy missed mortgage payments can be rolled into a new repayment plan.
What is the purpose of the automatic stay?
This action goes into effect when bankruptcy is filed; it halts collection activity from creditors. In a Chapter 7 bankruptcy, the stay can stop your home from being sold via sheriff sale and possibly extend your redemption period if you are already in this stage. In a Chapter 13, the stay halts collections on your mortgage until the court verifies your new payment structure.
What if I default on my payments in Chapter 13?
Payments are usually made either during or after the automatic stay period. If you default during the period, foreclosure is usually prohibited. If you default after the period, the bank may get an order from the court to continue with the foreclose, especially if a lien is on the property.
If I file Chapter 13 can it be converted to Chapter 7?
Depending on personal circumstances, your case could be converted but in some cases you may need permission from the court. Questions and concerns should be reviewed with a bankruptcy attorney .