Many people think that bankruptcy will be a cure-all for their financial problems. While there are many benefits to filing for bankruptcy in the right situation, the legal process cannot magically resolve all of your debt issues. One common question we hear is whether filing for bankruptcy will an individual who is behind on their mortgage payments avoid a foreclosure.
As in so many legal matters, the answer to this depends on your specific circumstances, though the following is a brief overview of how bankruptcy may be able to help.
The Automatic Stay
When you file your bankruptcy petition, the court will issue an order halting all debt collection attempts, which includes mortgage lenders and foreclosure actions that are already filed. While this automatic stay may buy you some time to catch up on your payments, mortgage lenders often request that the court lift the automatic stay so they can continue collecting payments. Whether the court grants this relief will depend on the details of the case.
Chapter 7 bankruptcy will not discharge any type of mortgage debt – either current or arrears. Therefore, you will still be behind on your mortgage the same amount you were prior to the bankruptcy. However, Chapter 7 can discharge many other debts and can rid you of large credit payments with high interests rates, medical bills, and other bills that take up a large part of your income. Without these payments, you will have additional funds to catch up on your mortgage.
Chapter 13
Chapter 13 bankruptcy allows you to include your mortgage arrears in your payment plan. Therefore, you do not have to worry about past due payments but can focus on simply staying on top of current payments. In many cases, this can help you prevent a foreclosure from being filed.
Discuss Your Debt Relief Options with a New York Bankruptcy and Foreclosure Attorney
Filing for bankruptcy is not the right solution for every struggling homeowner. You should discuss your various options with a highly skilled bankruptcy and foreclosure lawyer in New York who can help you determine your best course of action. Call the Law Office of Ronald D. Weiss at 631-479-2455 today.
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