How to Stop a Foreclosure

Can a Bankruptcy Stop a Foreclosure in Prescott?

It is very easy to get behind on mortgage payments. Even a temporary decrease in income because of a layoff or an illness can cause you not to have the money to pay your mortgage payment. You believe you will catch up the missed payment next month when your finances improve. However, one month turns into two months and so on until you are thousands of dollars in arrears on your mortgage. Before you know it, your mortgage company has filed a foreclosure lawsuit.

Facing a foreclosure action can be terrifying. The thought of losing your home and not having anywhere for your family to live can be crippling. However, you do not need to face this situation alone. Our Prescott bankruptcy attorneys can analyze your financial situation to help you determine your options for saving your home. Before you do anything, call 866-780-4855 to talk to an attorney for free.

Should I Use Retirement Funds or Savings to Catch Up Mortgage Payments?

Some people turn to their savings and retirement funds to catch up past due mortgage payments to prevent foreclosure. If you have an emergency savings account, these funds might be the best way to resolve the matter. However, if the monetary crisis that has resulted in the past due mortgage payments is expected to continue, using savings to catch up mortgage payments may not be the wisest way to use these funds. Once your savings is expended, you will still have the problem of not having sufficient money to pay your mortgage payments.

With regard to retirement funds, the same situation applies. If you will not have the money to pay your mortgage payments in the future, using retirement funds to avoid a foreclosure can be risky.  You are placing your financial future at risk when you deplete your retirement funds. Since retirement funds are typically protected in a bankruptcy case, it may be better to consult an experienced Prescott bankruptcy lawyer before you withdraw any retirement funds or use savings to stop a foreclosure.

Prescott Foreclosures in Chapter 13

An automatic stay goes into effect as soon as you file your Chapter 13 bankruptcy petition. Creditors are not permitted to continue collection efforts, including a foreclosure action or a foreclosure sale, as long as the automatic stay is in place. Therefore, any foreclosure lawsuit is put on hold when you file your bankruptcy petition.

If you want to keep your home, you must propose a repayment plan that includes payments to catch up your past due mortgage payments.  The amount you owe for the mortgage arrearage will include any late fees and costs of the foreclosure action. In addition to repaying the mortgage arrearage through the bankruptcy plan, you must resume making your regular mortgage payments outside of the plan.

If you fail to make your mortgage payments outside of the bankruptcy, the lender can petition the court to modify the stay to allow the lender to pursue other legal remedies, including a foreclosure. Therefore, it is crucial that you make all future mortgage payments on time.

One thing to keep in mind is that you might be able to get rid of a second mortgage by filing a Chapter 13 case. If your home is worth less than you owe on your first mortgage, you might be able to “value” the second mortgage at zero. This does not mean that the debt goes away. You still owe the debt; however, the debt becomes a general unsecured debt. The mortgage debt is then treated the same as any other general unsecured debt, such as your credit card debt or medical bills. Valuing the second mortgage releases the mortgage lien for pennies on the dollar.

Prescott Foreclosures in Chapter 7

A Chapter 7 bankruptcy filing will stop a foreclosure because the automatic stay applies in a Chapter 7 as it does in a Chapter 13 case. However, if you are unable to catch up your past due mortgage payments, including costs and attorney’s fees for the foreclosure action, before your Chapter 7 case is discharged and closed, the mortgage lender can resume the foreclosure proceedings as soon as your bankruptcy case is closed.

In some cases, the mortgage lender may be able to continue the foreclosure before the case is closed. The lender can petition the court to modify the automatic stay to allow the lender to proceed with a foreclosure. Unless there is good cause or a legal reason to deny the motion, the court usually grants these petitions to modify the stay in a Chapter 7 case.

Even though you might not be able to keep your home, a Chapter 7 filing can give you a few more months to make arrangements for a new resident. In addition, by filing a bankruptcy case, the mortgage company is prevented from pursuing a deficiency judgment after the home is sold. Therefore, you do not need to worry about being pursued for any amount that is owed after the foreclosure sale proceeds are applied to the account.

Do You Need a Prescott Bankruptcy Attorney?

If you are behind on your mortgage payments or you have received a foreclosure lawsuit, you should talk to our bankruptcy attorney. You may have several options for stopping the foreclosure and saving your home.

Call 866-780-4855 or use the contact form on our website to request your free bankruptcy consultation.