An increasing number of Americans facing financial difficulties are forced to make tough decisions regarding their homes. Unable to make their monthly mortgage payments, do they declare bankruptcy or lose their home? Both choices will lead to a lower credit score. Both may lead to public embarrassment. One will likely allow them to keep their home.
When home/property owners cannot keep up with their monthly mortgage payments, the financial lending institution (typically a bank or mortgage company) can take possession of the property and sell it to recoup the debt owed to them. This is called a foreclosure.
Typically, the foreclosure process is triggered when a person misses a specific number (2-3) of mortgage payments, prompting the lender to believe it won’t receive its money and demand immediate and full payment of the loan. After 90 days, if no mortgage payments have been made, the lender could issue a default notice, which would be delivered by the local sheriff to the homeowner and a date for a public auction of the home/property would be set.
Most lenders do not move quickly to foreclosure proceedings, which are costly both for the owner and the lender. If the home/property is nearly paid for, lenders may work with the owner to amend the payment plan or restructure the loan, giving the owner more time to pay off the loan. Still, once foreclosure proceedings begin, it’s difficult to stop them and to retain your property.
How would bankruptcy impact the process? If an individual files for Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” before the foreclosure sale, the court will issue an “automatic stay” that prevents your creditors, including your lenders, from contacting you or taking further collection action against you.
However, under Chapter 7 bankruptcy, most of your other assets – including autos and almost any of your possessions other than your primary residence – can be sold off to pay your creditors. You will lose all your current credit cards, retain much of your debt and have a lower credit score for at least 10 years, making it nearly impossible to secure another loan.
What can you do? While not impossible to prevent a lender from foreclosing on your home, it is extremely difficult to successfully do so without an extensive legal background. Hiring a legal professional who is experienced in foreclosure and bankruptcy law will almost always save you money and headaches during an incredibly stressful time in your life.
There are many options to consider when facing a foreclosure proceeding, as an attorney, like a foreclosure lawyer in New Haven, CT, from a firm such as The Law Offices of Ronald I Chorches, can explain.