Bankruptcy can be a path forward for saving your house if you are behind on your mortgage, but there are caveats.
Here’s what you need to know about stopping foreclosure.
The Chapter Matters
The automatic stay brought on by bankruptcy is really only a temporary solution. The Chapter you choose, and the timing of your filing will both matter as well.
A big factor will be whether you are currently current on your mortgage payments or whether you are already behind.
Chapter 7
Chapter 7 can only save your house if you’re current on your mortgage payments and have very little equity. The New York homestead exemption lets you protect just $150,000 in equity.
If you have too much equity the court will want to sell the home to pay your debts.
If you’re behind on your mortgage payments a foreclosure can still proceed. If you’re current, you can generally keep your home by reaffirming the debt and continuing to stay current on your mortgage payments.
Chapter 7 can be a good solution when all the other bills you have are straining your ability to make your mortgage payments on time. You earn the financial breathing room to restructure your budget.
Chapter 13
Chapter 13 lets you catch up on a mortgage that is in arrears. The delinquent payments are simply rolled into the repayment plan even as second and third mortgages are eliminated.
By the end of the Chapter 13 program you should be fully caught up. As long as you continue to make payments as normal you can keep the house.
Some people use a Chapter 13 to buy time for a sale. This allows them to downsize. When this happens, they’ll still have to pay the other debts in their plan. Sales may only proceed with trustee permission.
The Lender Can Fight the Automatic Stay
The automatic stay halts all debt collection while the bankruptcy case proceeds, but it’s not iron clad.
The mortgage lender can ask the court to lift the automatic stay. If they are successful, they can continue collection efforts, including foreclosure.
As your bankruptcy attorney we will of course try to fight this motion. Unfortunately, a secured creditor like a mortgage lender often has the best chance at convincing a judge to lift the stay.
The good news is creditors generally won’t fight to lift the stay if you are filing Chapter 13 and have already shown that you intend to see the missed payments handled as part of your Chapter 13 plan.
There Are Additional Options
As your New York bankruptcy attorney, we can help you explore other options for rescuing your home if bankruptcy isn’t the right choice for you at this time. This can include:
Our office can help you navigate these options as well.
Get Help Today
Don’t face major financial problems like foreclosure alone.
Reach out to our office to schedule a free consultation. We’re ready to help.
See also:
What Will Your New York Chapter 13 Payment Look Like?
If I’m Declaring Chapter 7, When Do I Have to Move Out of My House?
Can I Buy or Sell a House During a New York Bankruptcy?
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