Written in “non-attorney” language by a non-attorney
There’s not enough money at the end of all the bills you have to pay. Costs of living keep going up and your monthly paycheck isn’t keeping up with the price of gas, the cost of food and everything else needed, let alone have extra for emergencies or luxuries. And then . . .
One day you receive a piece of paper in the mail called a “Notice of Default” or a process server hands you a “Summons and Complaint for Foreclosure”. Either way, both are bad news because they mean your lender has initiated foreclosure proceedings against you (in either a non-judicial or a judicial foreclosure state respectively) because you owe back payments — typically at least three months worth. . . or more.
Then you start thinking, “Maybe I could cheat fate by filing for bankruptcy. That will wipe out all my debts. I can stop the foreclosure, keep the house, and the lender can’t do anything about it.”. We’ve all seen the commercials on TV, keep your house file bankruptcy. Well, regretfully think again!
There are certain threshold qualifications that must be met which were tightened up when the U.S. Bankruptcy Code was revised a few years ago. There are different types of personal bankruptcy and you have to income qualified based on household size and dependents.
If you file for personal bankruptcy under Chapter 7 a so-called “automatic stay” is placed on all your creditors, including the foreclosing lender, by the court. HOWEVER, the stay is only a temporary fix to the situation. And it will be years before you can use this type of protection if needed. TIMING is everything and ALL bankruptcy options should be used as a last, not first resort to save your property.
Chapter 7 never permanently stops home foreclosure. It only gives you relief from unsecured creditors like credit cards and prevents certain creditors from pursuing collection action against you. It does NOT discharge debts such as taxes, child support, alimony or student loans, nor can it give you relief from other secured creditors — like your lender — whose debt is secured by the home you’re living in.
In fact the “automatic stay” is only effective so long as the court wants it to be in place. At any time the court can grant your lender’s motion for “relief from the automatic stay.” Once the court grants that motion the foreclosure against your home can proceed to conclusion even though you are “in bankruptcy”. In this type of bankruptcy, the amount owed not the actual property (home, land etc.) is protected.
One viable exception does exist to keep your property, however, by filing for a Chapter 13 bankruptcy. Keep in mind that regretfully recent statistics nationally show that 75% of Chapter 13 bankruptcies fail. Think of it this way, what brought you to where you are financially? House payments you couldn’t afford? Medical issues? Too much debt? No matter what brought you here, a Chapter 13 can be almost like having a 1st and 2nd mortgage. Many people wonder how could I ever afford that when I can’t even get the lender to modify my first mortgage.
Under Chapter 13 a trustee makes arrangements and a payment plan with your creditors to pay back what you owe them over a given length of time and usually on a lower payment schedule. Once accepted, the creditors, like your lender, must abide by the terms of the plan. You will have to be able to income qualify for this type of plan (prove that you can make the payments) and now pay whatever the old mortgage payments were and also pay the trustee monthly based on the payment plan arranged to all your other creditors. If it sounds like “I didn’t know all of that”, that is exactly why DPS Network was formed. Too many “solutions” are being presented to owners in distress without all the ugly details behind the magic “fix it” door being explained in full.
Look at it Chapter 13 is a way to save your home from foreclosure, and can indeed stop foreclosure so long as you continue to make the payments agreed to under the plan until all debt owed is totally paid off.
In essence, then, through a Chapter 13 debt reorganization plan you can cure the default and save your home. Additionally, there are court costs to be paid, AND, of course, the homeowner must hire a bankruptcy attorney who is going to want to get paid too!
Contact a DPS Network Negotiator today to get your No Cost consult and discover what the DPS Network can do for you.
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