Understand Your Options When Your Home Is at Risk
Falling behind on mortgage payments can quickly become overwhelming, especially when late fees, collection notices, and the possibility of foreclosure begin to build. If you are struggling to keep your mortgage current or have already received a foreclosure notice, understanding your legal options as early as possible can be important.
At CN Bankruptcy Law, we help homeowners evaluate how bankruptcy may affect mortgage debt and foreclosure proceedings. Depending on your circumstances, Chapter 7 or Chapter 13 bankruptcy may provide protections that give you an opportunity to address your financial situation and determine the best path forward.
Can Bankruptcy Stop a Foreclosure?
Filing for bankruptcy generally triggers an automatic stay, which requires most creditors to stop or pause certain collection actions. In many cases, this protection can temporarily halt a foreclosure proceeding.
The automatic stay is not a permanent solution to every foreclosure, and exceptions or limitations may apply. However, the additional time provided by bankruptcy can be valuable when evaluating options for dealing with mortgage arrears and other debts.
Because foreclosure proceedings are time-sensitive, homeowners should consider seeking legal guidance before a scheduled foreclosure sale whenever possible.
Chapter 13 Bankruptcy and Past-Due Mortgage Payments
For homeowners who want to keep their property but have fallen behind on mortgage payments, Chapter 13 bankruptcy may offer an important option.
Chapter 13 allows qualifying individuals with regular income to reorganize their debts through a court-approved repayment plan, generally lasting three to five years. Depending on the circumstances, past-due mortgage payments may be addressed through the plan while the homeowner continues making required ongoing mortgage payments.
Whether Chapter 13 can help you keep your home depends on your income, mortgage balance, equity, other debts, and ability to maintain required payments.
Chapter 7 Bankruptcy and Your Mortgage
Chapter 7 bankruptcy may help eliminate qualifying unsecured debts, potentially freeing up income that can be used for necessary expenses such as mortgage payments.
Chapter 7, however, generally does not provide the same long-term mechanism for catching up on mortgage arrears as Chapter 13. Homeowners considering Chapter 7 should also understand how bankruptcy exemptions, home equity, mortgage liens, and their payment status may affect their property.
A careful review before filing can help identify potential risks and available protections.
What Happens to Your Mortgage in Bankruptcy?
Bankruptcy can eliminate personal liability for certain debts, but secured debts such as mortgages involve additional considerations. A mortgage lender generally maintains a lien against the property unless that lien is modified or otherwise addressed as permitted by law.
Your options may depend on several factors, including:
- Whether you are current or behind on mortgage payments
- The amount of equity in your home
- Your income and ongoing expenses
- The type of bankruptcy you file
- Applicable bankruptcy exemptions
- Other liens against the property
- The stage of any foreclosure proceedings
Understanding these factors before filing can help you make an informed decision about your home and financial future.
Facing Foreclosure? Timing Matters
Waiting until the last moment can reduce the options available to you. If you have received a notice of default, foreclosure complaint, sale notice, or another communication indicating that your home may be at risk, it may be beneficial to discuss your situation with a bankruptcy attorney promptly.
Bankruptcy is not the right solution for every homeowner, but understanding whether it could provide protection before a foreclosure advances can help you make better-informed decisions.
Address More Than Your Mortgage Debt
Mortgage problems often occur alongside other financial challenges. Credit card debt, medical bills, personal loans, wage garnishments, and other obligations can make it increasingly difficult to keep up with housing expenses.
Bankruptcy may provide an opportunity to address multiple financial problems through one legal process. Depending on your circumstances, eliminating or reorganizing other qualifying debts may make your overall finances more manageable.
Speak With a Bankruptcy and Foreclosure Attorney
If you are behind on your mortgage or concerned about losing your home, CN Bankruptcy Law can help you understand the relationship between foreclosure and bankruptcy. We can review your mortgage, debts, income, assets, and financial circumstances and explain whether Chapter 7, Chapter 13, or another available option may be appropriate.
Learn About Your Mortgage and Foreclosure Options
Contact CN Bankruptcy Law to discuss your situation and learn how bankruptcy may affect your mortgage, foreclosure proceedings, and other financial obligations.
Bankruptcy and foreclosure laws, procedures, timelines, and available protections vary based on jurisdiction and individual circumstances. Filing bankruptcy does not guarantee that a homeowner will be able to retain their property. This information is for general informational purposes and does not constitute legal advice.
