If you are facing a foreclosure due to job loss, a reduction in income or your income not increasing as planned, a bankruptcy can stop the process and put you back on track. You may just want some extra time in your home before you have to let it go. You may have credit card payments or even garnishments making it impossible to pay your mortgage. Whatever the problem is, bankruptcy will stop a foreclosure and give you a chance to reorganize and save your home.
The foreclosure process takes months or even years. The end result is the sale of your home at auction. A bankruptcy will stop the foreclosure up to the point of sale. In Washington, a mortgage company has to give you a chance to go through mediation, which at least gives you a chance to discuss options like cash-for-keys, a short sale, and mortgage modification.
You can continue to pursue mortgage modification during bankruptcy or after bankruptcy. By eliminating other debt in bankruptcy, you may make yourself more eligible for a modification.
A Chapter 7 liquidation bankruptcy will stop a foreclosure as soon as the bankruptcy is filed. This form of bankruptcy does not offer a long-term solution to your foreclosure. A mortgage company can continue the foreclosure process in as little as a month after you file the case, though it usually takes much longer for them to start the foreclosure back up again. A Chapter 7 will help you eliminate debt and make it easier to concentrate on making home payments. If you can catch up once other debt is eliminated, you will be able to stay in your home.
A Chapter 13 offers a way of consolidating your back mortgage payments with other debt. This repayment plan lasts from three to five years. At the end of the plan, you will be completely caught up with your mortgage, and you can continue to pay it as always. As long as you follow the plan and it complies with the law, the mortgage company has to accept it.
Bankruptcy is a powerful tool for dealing with creditors, and mortgage companies are no exemption. Unfortunately, nothing in bankruptcy can change the terms of a first mortgage, but you can strip a second mortgage in a Chapter 13 if your home is worth less than balance on the first mortgage.
If you're considering bankruptcy and want to save your home, contact us today. During your free consultation, an experienced Seattle, WA bankruptcy lawyer will let you know how we can help you.