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How To Deny Your Mortgage Holder The Pleasure Of Foreclosing

On Behalf of | Jan 17, 2017 | Bankruptcy

If unanticipated financial issues caused your mortgage payments on your Cincinnati home to fall behind, you might have tried other options, such as refinancing or working out a modified payment plan. If your lenders refused to accommodate you, you could deny them the pleasure of foreclosing on your property by filing for personal bankruptcy.

Your mortgage holder will advise you of the commencement of foreclosure action as soon as your mortgage payments are three months behind, and the entire outstanding balance will become due. If you are unable to obtain alternative financing, foreclosure will proceed — unless you put a stop to the foreclosure process by filing for bankruptcy.

When to file for bankruptcy?

As soon as you know foreclosure proceedings are imminent, or when you receive notification of such action by the lender, you can file for bankruptcy. This will hold off your mortgage company and other creditors while giving you the opportunity to address the financial challenges you are facing.

Upon filing for bankruptcy, the court will issue an automatic stay to provide protection from foreclosure. None of your creditors may then continue debt collection actions until the discharge of your case. The lender is entitled to petition to have the stay lifted, and bankruptcy does not stop all foreclosures.

Which bankruptcy chapter is the best option?

  • Chapter 7 — This option is typically suitable for consumers without a secured income who are unable to pay off any of their debts. By filing for Chapter 7, debts, such as credit card debt, medical debt and other unsecured debts are discharged. A mortgage typically comes with a lien for which the collateral is the home. Bankruptcy filings do not discharge liens, and a Chapter 7 cannot typically save a home from foreclosure.
  • Chapter 13 — Even though your lender refused to work out a new repayment plan previously, Chapter 13 bankruptcy allows you to restructure all of your debts under a new repayment plan. The mortgage company must afford you the opportunity to draft a plan that will probably involve catching up with late interest and payments during the three to five years of debt reorganization. If no payments are late or go unpaid, your home may be safe from foreclosure.
  • Tax implications — If defaults on mortgage payments led to unpaid taxes, current laws would not hold you accountable. However, in cases of non-mortgages, you have to pay taxes. These circumstances include the use of home equity funds to finance vacations, loans for second or third homes or other nonessential items or activities.

Help is available

These are only bits of information, and you will likely have many unanswered questions about how to stop your mortgage holder from foreclosing on your family home. All the answers are obtainable from an experienced Cincinnati bankruptcy attorney who can explain the pros and cons of such action, and provide support and guidance throughout your bankruptcy process.