Filing for Bankruptcy Can Stop Foreclosure – When you Need to Talk to Your Bankruptcy Attorney
Did you know that filing for bankruptcy can stop your home from being foreclosed upon? If you are considering filing for bankruptcy you should speak to a Seattle bankruptcy attorney to learn about what options may be available to you. Seattle bankruptcy lawyers will probably tell you about some of the options listed in this article. The course of action that you should take will be based on your individual situation.
Loan Modification
Once you are behind on your house payments, your lender may take steps to enforce the terms of your loan by attempt to sell the house at a trustee’s sale to recoup some or all of its money from the proceeds of the auction price.
If you are behind on your payments most lenders will try and get you caught up and probably won’t try to foreclose until the loan is at least 90 days in arrears. If you are behind on your loan payment, you should call your lender and see if they will allow you to have a modification of your loan terms. It sounds easier said than done though as lenders are notoriously slow in approving loan modifications and it may take over a year to get something approved.
Short Sale or Deed in Lieu
Another option for home owners trying to avoid bankruptcy is attempting a short sale or deed in lieu of foreclosure. A short sale is selling the house for less than what is owed on the loan, and the lender must approve the sale at the lower price. Lenders accept these deals because they often may come out ahead rather than having the borrower continue to be delinquent on the payments. It should be noted that in Washington state, debtors will not be liable for any deficiencies on their first mortgage
A deed in lieu of foreclosure occurs when the borrower voluntarily turns the property over to the lender. This may be another option available to borrowers facing tough times and trying to avoid foreclosure.
The Automatic Stay: Delaying Foreclosure
When you file for bankruptcy, an automatic stay protects you home from being foreclosed unless the lender petitions the court for relief from the automatic stay in order to foreclose.
How Chapter 13 Bankruptcy Can Help
A chapter 13 bankruptcy can help a borrower make up the payments that they are behind. These arrears must be made up in full over a 5 year period so the debtor must have income in order to file for chapter 13 bankruptcy.
If you successfully complete your Chapter 13 payment plan, your unsecured debts that have not been paid will be forgiven and your house payment will revert to normal and you keep your house.
How Chapter 7 Bankruptcy Can Help
Filing for Chapter 7 bankruptcy will allow you to buy some time to figure out your financial situation and delay any sort of foreclosure. It should be noted that once you receive a discharge of your unsecured debts, lenders may once again start foreclosure proceedings as they are no longer covered by the bankruptcy automatic stay. Delaying the process may also allow you to live rent free in your home while your bankruptcy is in progress.