Did you know that you could stop a foreclosure dead in its tracks with an automatic stay?
Yes, you can stop a foreclosure at the last minute.
In case the foreclosure sale is scheduled to happen in the next day or two, the deal can stop promptly by declaring bankruptcy.
Something called an automatic stay goes into effect once you declare bankruptcy.
You can Stop Foreclosure with Automatic Stay
The stay functions as an injunction forbidding your mortgage lender from foreclosing on your home or otherwise attempting to collect its debt. This implies that any foreclosure action must be stopped throughout the bankruptcy procedure.
Now don’t get me wrong, your lender can and still might file a motion for relief from the stay. Your lender may try to have the stay revoked by filing a motion seeking authorization from the court to continue with the foreclosure.
Most of the time, it doesn’t do the lender any good to file a relief from stay.
Even when this motion is granted by the bankruptcy court and permits the foreclosure to continue, the foreclosure may be delayed for at least a month or two.
If you stop the foreclosure with an automatic stay, it will cause the courts to review the entire case cautiously. Why? Because new laws have been implemented in all states that look at foreclosure process closely.
In some cases, if the foreclosure process has been ignored or overlooked, the foreclosure procedure will start an entirely new process.
This should give you enough time to speak with your lender and find other alternatives to foreclosure. A loan modification may be the answer,
Chapter 13 Bankruptcy – Re-establishes
A Chapter 13 bankruptcy will help you stop a foreclosure in the last minute, if your intent is to keep your home. Nevertheless, if you are attempting to buy some time by delaying the foreclosure, a Chapter Seven bankruptcy will work just as well.
Benefits of a Chapter 13 bankruptcy may help you maintain your home by restructuring your debts.
You are going to repay debts over a period of 3 to 5 years in connection with a reimbursement plan.
A Chapter 13 bankruptcy plan may allow you to remain in your home while at the same time catch up your delinquent mortgage payments. Moreover, a Chapter 13 plan may allow you to eliminate some of the unsecured debts, such as 2nd and 3rd mortgages along with other debts.
I know of some homeowners who have remained in their homes for 5-7 years under a Chapter 13 and did not pay a dime. But you know what, usually when lenders have allowed homeowners to remain in their homes that long there is a reason.
Usually, the lender’s loan documents are fraudulent or it’s a case of predatory lending.
What’s great about a Chapter 13 plan is that it gives you “room to breathe” and re-establish all of your debts. Plus, your creditors won’t perceive your financial chaos as a total bail-out.
Your lender will perceive you as a credible and responsible borrower/homeowner.
In addition, a credible borrower looks good when trying to purchase that next home or buy another car.
Even when you cannot finish the plan, filing a Chapter 13 bankruptcy may give you at least a few months before
Chapter 7 – Renounces all Debt
On the contrary, a Chapter 7 bankruptcy plan will stall your lender while you remain in your home.
However, it won’t stop them from selling your home.
A Chapter 7 clearly eliminates all of your debts.
This is not a good idea unless you are OK with giving it all up.
However, it’s not a bad idea, that is if you have decided to let everything go. Chapter 7 would give you some time to save up some money to start over and find a rental or lease an apartment. Using a Chapter 7 or 13 bankruptcy will stop foreclosure with automatic stay.
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