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Ronald D. Weiss
If you are behind on your house payments, you may be facing imminent foreclosure action from the bank. Because your home is a secured debt, it is possible for the bank to take your home for nonpayment. There are ways to stop this process, including negotiating with your lender through mortgage modification programs, which can lower your payment amounts and allow you to refinance to a loan that is more affordable even if you are underwater. However, mortgage modification is not a solution for everyone and can be a long process. If your foreclosure is imminent, one of the best options you have to stop the foreclosure is to declare bankruptcy. The impact of a bankruptcy on your home is going to vary depending upon what chapter of bankruptcy you file. However, in the vast majority of situations, bankruptcy is a solution that can help you to keep your home.
www.ny-bankruptcy.com
However, bankruptcy can still help to save your home in large part because of rules related to automatic stays. As soon as you file for bankruptcy protection, an automatic stay goes into effect. This stops lenders from pursuing any type of collections activities against you throughout the duration of the bankruptcy, unless the lender goes through a process that involves filing a motion for relief from the automatic stay. Because the automatic stay stops collections activities, a bank will not be able to pursue foreclosure. As your bankruptcy moves forward, you can use that time to try to negotiate with the mortgage lender to find an alternative to foreclosure through mortgage modification programs. The bankruptcy, in a sense, buys you time to work out a way to save the home. The bankruptcy can also buy you time to raise money in order to become current on the mortgage debt that you owe so the bank does not foreclose. The automatic stay applies to both Chapter 7 and Chapter 13 bankruptcy, which are the two most common types of consumer bankruptcy. However, these chapters of bankruptcy are very different and can provide different solutions to help you protect your home.
www.ny-bankruptcy.com
When you file for Chapter 7, you will have eligible debts discharged in the bankruptcy. This means that debts like credit cards and other unsecured debts are forgiven and no longer need to be paid back. When you have been relieved of responsibility for paying most of your debts, your mortgage payment may become affordable. You can reaffirm the debt on the home and, as long as you become current and continue to pay, you will be able to keep your home. Chapter 7 does require a sale of some of your non-exempt assets in order to file for bankruptcy protection. Homestead exemptions, however, allow you to keep most of the equity in your house. This means unless you have a home that is worth far more than what you owe on it, your interest in your home is not affected by the bankruptcy process.
A chapter 13 bankruptcy makes lien stripping possible as long as you can prove the second mortgage holder would not be paid back money if the home was foreclosed on.
www.ny-bankruptcy.com
When determining your monthly payments under Chapter 13, you will need to be able to pay your mortgage in full to keep the house. However, there is a limited exception to this rule in cases where you have a second mortgage or other nonprimary mortgage on your home. When you have two or more mortgages on your home, the first mortgage is the primary mortgage. When foreclosure for nonpayment forces a sale of the house, the proceeds must go to pay off the first mortgage in full before the second mortgage holder receives any funds. If the sale of your home would not generate enough money to pay off the first mortgage and still have funds left to pay to the second mortgage lender, then the second mortgage is not really a secured loan and the lender does not really have a security interest in the house. In situations like this, a process called lien stripping can reclassify the second mortgage debt as the unsecured debt that it actually is. A chapter 13 bankruptcy makes lien stripping possible as long as you can prove the second mortgage holder would not be paid back money if the home was foreclosed on. The newly unsecured debt can then be included in your chapter 13 repayment plan and you may be able to pay back less than the full amount due. This means lien stripping allows you to keep your home without paying back all mortgages in full.
www.ny-bankruptcy.com
An experienced Long Island bankruptcy attorney should be consulted to assist with a Chapter 13 mortgage that involves lien stripping, as these cases can be very complicated.
www.ny-bankruptcy.com
www.ny-bankruptcy.com