In the United States, foreclosure laws may vary from state to state. In contrast, bankruptcy is federal law and in general treats foreclosure uniformly. In New York, bankruptcy may be able to help stop a foreclosure sale. Filing for Chapter 7 can potentially delay a foreclosure action for a number of months while a Chapter 13 bankruptcy can possibly save your home from foreclosure.
Why is My Bank Foreclosing on My Home?
A bank or lender may foreclose on your property when you violate certain terms of the agreement you made to borrow money to purchase your home. Typically, a foreclosure occurs when the borrower/homeowner fails to pay their mortgage payments. A bank or lender cannot just foreclose on a property. They must follow certain procedures and laws such as properly notifying the homeowner of their attempt to foreclose.
Usually a lender or bank will attempt to foreclose on a property after numerous monthly mortgage payments have been missed. The amount of missed payments that can trigger a foreclosure depends upon the bank or lender but most will begin foreclosure proceedings when 4 to 5 consecutive mortgages payments have been missed.
Can Chapter 7 Stop Foreclosure?
Filing for Chapter 7 bankruptcy cannot permanently stop a foreclosure lawsuit. However, filing for Chapter 7 Bankruptcy in New York and other states can only delay foreclosure proceedings. When you file either Chapter 7 or 13, the court issues an “automatic stay”. An automatic stay forces creditors to cease their collection attempts immediately. If your home is in the process of being foreclosed on, the process will typically be legally postponed during the bankruptcy.
The postponement usually lasts for 3 to 4 months but there are some exceptions when the bank or lender can continue with the foreclosure proceeding. If the lender is able to obtain the bankruptcy courts permission to proceed with the sale, you may not be able to delay the process for the entire amount of time. When a lender makes this type of request to forego the delay, it is called a “motion to lift the stay”. Even if a lender or bank files a motion to lift the stay, the foreclosure process is usually still delayed by at least 2 to 3 months.
Can Chapter 13 Stop Foreclosure?
Yes, filing for Chapter 13 can stop a foreclosure action. A Chapter 13 bankruptcy in New York can allow you to create a repayment plan for any past due mortgage payments. To save your home, you must at least be able to afford your current mortgage payments while making the payments toward the unpaid late payments. You will have up to five years to pay back your past due payments in a court-ordered Chapter 13 repayment plan. If you can make both your payments, it is likely that you will be able to keep your home
Can I Eliminate a 2nd Mortgage in a Chapter 13 Bankruptcy?
In some scenarios, Chapter 13 bankruptcy can eliminate your second mortgage. If your home dropped in value, you may not have enough equity in your home for the second mortgage to have a secured lien. If the value of your home is less than the amount owed on the first mortgage (this is often referred to as being “underwater” on your mortgage), you may be able to eliminate a second mortgage or home equity loan. In this scenario, the debtor would bring an adversary proceeding asking the Bankruptcy Court to strip off the second mortgage and categorize it as unsecured debt in the Chapter 13 repayment plan.
Does a Bankruptcy Filing Always Automatically Stop a Foreclosure?
A Chapter 7 or 13 may not always delay a foreclosure proceeding. There are limitations on your ability to obtain an automatic stay imposed by the Bankruptcy Abuse Prevention and Consumer Protection Act. For example, if you had two bankruptcy cases pending in the year prior to filing, the automatic stay does not go into effect unless you make a motion with the Bankruptcy Court and have it approved.
How Can I Save My Home From Foreclosure?
How and if you can save your home from foreclosure often depends on how quickly you take action. In addition to foreclosure defense, opposing the foreclosure lawsuit in state court, there are other options available in New York that can help save your home. What options are available to you will depend upon where you are in the foreclosure process, your financial situation and other factors. For example, we can potentially request a loan modification which can save your home. To understand what options are available to you, contact us today for a free consultation. We can review your situation and help you better understand your options to help save your home. The sooner you contact us, the sooner we can help and the more options that may be available. Please feel free to call us toll-free (888) 529-9600, or email us by using our contact us form.