Will Bankruptcy Stop Foreclosure Of My Mortgage Loan?

Bankruptcy will delay foreclosure temporarily, but will not stop or terminate it altogether. If you file for bankruptcy, the foreclosure will be “stayed” in the State Court. Normally, the mortgage bank then files a motion in the bankruptcy court that requests that it be allowed to proceed with the foreclosure. In most instances, the motion will be granted, and the bank will be allowed to remove the home from the bankruptcy and proceed with the foreclosure. A homeowner remains responsible for paying the mortgage. A bankruptcy does not relieve the homeowner from the responsibility to pay his or her mortgage.

If homeowners are behind on their mortgage, they may choose to file a Chapter 13 bankruptcy. A Chapter 13 bankruptcy allows the homeowner to catch-up the arrearage by paying it over the term of the of the Chapter 13 Plan, which is 3 – 5 years in length. As long as the homeowner continues to make his or her monthly payment to the Chapter 13 Trustee while the Plan is in effect, when the Plan is completed, the arrears are caught-up and the homeowner may remain in the home. While the Chapter 13 Plan is in effect, in addition to making the monthly Plan payment to the Trustee, the homeowner must resume making the regular mortgage payment to the bank, each month. Homeowners must decide if they are able to afford to file Chapter 13 bankruptcy. A Chapter 7 bankruptcy does not afford the same opportunity as a Chapter 13 to save a home from foreclosure. If homeowners are behind on their mortgage payments, and they file a Chapter 7, the bank will be able to proceed with the foreclosure. However, upon successful discharge of the homeowner following the Chapter 7, the bank can not sue the homeowner for and deficiency owed on the loan account.

Regardless, of what type of bankruptcy a homeowner files, the important thing is to act quickly in seeking legal help. There are many misleading advertisements out there that promise help to homeowners who fall behind on their mortgage. Seek qualified legal help in your area as soon as a problem arises.

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