Bankruptcy can be Used as a Powerful Tool to Fight Foreclosure
Bankruptcy is one of, if not the most powerful tool in your foreclosure defense arsenal. Whether you file a Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, or Chapter 11 Bankruptcy, upon filing, the foreclosure action stops and a temporary “stay” is placed on further foreclosure proceedings.
In addition, the bankruptcy process allows the homeowner to restructure the arrears, propose a payment plan or even discharge mortgage debt.
Federal Bankruptcy Laws, based on supremacy, supersede State Laws in most cases. In foreclosure cases, Bankruptcy trumps State foreclosure laws.
The bankruptcy process can put a halt to the foreclosure process, prevent a foreclosure judgment from being entered, stop a foreclosure auction and even delay eviction proceedings associated with a foreclosure sale.
How can Bankruptcy Help During Foreclosure
First, bankruptcy can buy you much needed time. This valuable time can be used to prevent the foreclosure proceeding form going forward, but also, allows you to investigate other options such as Mortgage Modification or a sale of the property.
Second, the Automatic Stay goes into effect immediately upon filing any bankruptcy case. This prevents further action by the mortgage lender and allows you to maintain control of your property. Lawsuits, judgments, auction sales and evictions are halted and any further action must first be approved by the judge presiding over your bankruptcy case.
Third, Chapter 13 Bankruptcy allows you to propose a three to five year payment plan to the mortgage lender to spread out the mortgage arrears. The foreclosure proceeding is stopped and the bank is forced to accept payment over the allotted plan payment period.
Finally, the completion of a bankruptcy case will protect the homeowner from a deficiency judgment imposed by the mortgage lender. Many homeowners are simply “walking away” from their homes, however, this can be dangerous. If the house is auctioned for less than market value and an outstanding balance is left on the mortgage, the bank may be able to get a deficiency judgment against you.
If you live in Long Island or Queens, call today to schedule a free, no-obligation, informal consultation either in my office, over the telephone, at your home or at a coffee shop near you. We will discuss your situation in detail and together, determine whether bankruptcy is a viable foreclosure solution in your situation.