Is It Possible? Is It in Your Best Interests?
Though mortgage debt is not the most common cause of a bankruptcy filing, it’s not unusual for a bankruptcy petition to include property that is in or near foreclosure. If you are struggling to meet your financial obligations and you have a substantial mortgage, you may be wondering if you can get the protection of the bankruptcy laws and still keep your home. While it may be possible, a better question to ask may be whether it’s in your best interest to keep your home.
Using a Bankruptcy Filing to Avoid Foreclosure
It’s important to understand that a bankruptcy proceeding won’t necessarily make a foreclosure proceeding go away. Technically, it will only suspend the process. There’s an “automatic stay” that goes into effect when you file for bankruptcy, prohibiting creditors from calling, writing or taking legal action (other than through the bankruptcy proceeding) while the stay remains in effect.
It’s also important to understand that if you’re far behind on your mortgage, you cannot discharge the mortgage debt in Chapter 7 and keep your home. While you may be able to exempt your home from inclusion in the bankruptcy estate (which means it can’t be sold by the court to satisfy your creditors), the lien on the property will not be extinguished by the bankruptcy proceeding. Your lender can still execute the lien and seek to repossess the property, unless you work out new payment arrangements.
Typically, the best way to use bankruptcy to avoid foreclosure is through Chapter 13. This allows you to reorganize your finances while giving you up to five years to repay the mortgage arrears. You must, however, make all agreed payments in a timely manner or the Chapter 13 may be terminated.
Before you file a bankruptcy petition, though, ask yourself if it’s in your best interest to keep the house. Can you really afford it? How much equity do you have in the house? If you think you think a Chapter 7 or Chapter 13 is right for you, contact our office for a free consultation.
Contact Our Offices
At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.
