Law Office of Rick Morin, PC

Bankruptcy comes in several flavors. Each bankruptcy “chapter” has its own advantages and disadvantages. What type of bankruptcy is best for foreclosure? Read on and I will tell you.

Bankruptcy Stops Foreclosure

A bank starts foreclosure proceedings when a borrower defaults on the terms of their home loan. Each lender is different, but getting past 90 days late on a mortgage puts the borrower in the danger zone.

In order to prevent a bank from selling a home at a foreclosure sale, the borrower must bring their mortgage account current. This usually means paying the missed mortgage payments, plus penalties, interest, and sometimes even attorney’s fees. This can be a substantial amount of money. Not everyone can just write a check to bring the mortgage account current.

The good news is that all types of bankruptcy halt foreclosure proceedings. This means that bankruptcy is an effective tool to stop a foreclosure. What happens next depends on the type of bankruptcy being filed.

Chapter 13 Bankruptcy is Best for Foreclosure

Filing Chapter 13 bankruptcy stops a foreclosure sale dead in its tracks. That is just a temporary solution to a much larger problem. Chapter 13 has a borrower covered with a long-term solution as well.

In Chapter 13 bankruptcy, a debtor repays some or all of their bills over time. Included in the list of debts that must be repaid in full during a Chapter 13 is mortgage arrears.

Mortgage arrears is the fancy name for the amount of money a borrower must repay to bring their mortgage account current. Most mortgage companies will not let a delinquent borrower repay their arrears over time. Pay up, or get out, is what the mortgage companies say.

Chapter 13 bankruptcy allows a delinquent borrower to repay their mortgage arrears over time. Up to 60 months, in fact. Spreading mortgage arrears payments out over 5 years is a huge benefit to a borrower that cannot come up with the full payment in a lump sum.

Chapter 13 is a tricky bankruptcy to get right. When done correctly, Chapter 13 is a very powerful tool. Saving a home from foreclosure is just one benefit of Chapter 13 bankruptcy.

I have helped delinquent homeowners all over Northern California save their homes from foreclosure with Chapter 13 bankruptcy. Please call my office at (916) 333-2222 to discuss your bankruptcy options.