Filing Bankruptcy may Help Homeowners Save their House from Foreclosure Under Certain Situations
Foreclosure is a legal process in which a creditor or lender takes possession of a property (which serves as a collateral for a loan) due to a borrower’s or mortgagor’s failure to keep on making mortgage payments to the lender. Creditors usually do not begin a foreclosure process on any property unless mortgage payments have been delayed for about two to three months. After this length of delay, some creditors (usually banks) still willingly work out deals with homeowners, like allowing them to settle unpaid mortgages through a loan modification, however, many other creditors do not and, instead, begin a foreclosure process, wherein they repossess and usually sell the unpaid property at a public auction. Proceeds from the auction will be used to repay the mortgage and any legal fees. On the part of a homeowner, who would try to do anything to save his/her house from being foreclosed on, he/she may take advantage of the loan modification solution or try other alternatives, such as filing bankruptcy.
The U.S. bankruptcy law, which originates from Title 11 of the United States Code (also called United States Bankruptcy Code) is a federal statutory law designed to help or enable consumers and businesses to either eliminate or repay their debts under the protection of a bankruptcy court.
Homeowners facing foreclosure may find bankruptcy as a tool to help them keep their house; specifically, Chapter 13 or Chapter 7 may help them accomplish this. As explained by Ryan J. Ruehle Attorney at Law, LLC, it is important for consumers and businesses to understand the different bankruptcy chapters available as each chapter is designed to address and solve specific financial problems and debtor situation.
Through Chapter 13 bankruptcy, for instance, (this is also called a wage earner’s plan), a homeowner is allowed to propose a three to five-year installment repayment plan which could allow him/her to repay all or part of his/her debts to his/her creditors. It is necessary this time, however, that a homeowner never again delay or miss mortgage payment, otherwise, there may be no other way to save his/her house from being foreclosed on.
Under Chapter bankruptcy, on the other hand, a homeowner may just be able to save his/her house but only if his/her creditor foreclosed on his/her home without following the proper procedures; this will allow him/her to file a wrongful foreclosure suit. Otherwise, if his/her creditor is able to foreclose on his/her property, there will be no means of getting his/her house back. The greatest benefit of filing Chapter 7, if this were the case, is saving the homeowner from still having to pay his/her creditor any deficiency balance (a deficiency balance arises if the proceeds from the foreclosure sale are not enough to cover the balance of the mortgages).
According to the law firm Gagnon, Peacock & Vereeke, P.C., wrongful foreclosure can be an extremely difficult thing to go through. A homeowner will also most likely have no idea if his/her house was being foreclosed on wrongly. This is why it may be necessary for homeowners to get help from a qualified legal counsel who may be able to help them fight for the right to keep their home.