How Foreclosures and Chapter 13 Bankruptcy Go Hand in Hand
Typically, people pay their mortgage before anything else. They might let their credit card or other bills fall behind, but they pay for their house. That makes sense – after all, your house is your most important investment, and it provides essential shelter.
However, when your financial situation gets really bad, eventually, you stop paying the mortgage also. Or maybe you don’t intend to stop paying it; you just fall behind. You want to catch up, but you just can’t do it because the money’s just not there.
Instead of giving up to the idea that your house will be foreclosed, you need to hire a Gilbert bankruptcy attorney.
The first step toward savings your house from foreclosure through a bankruptcy filing is the automatic stay. When the bank has decided to move forward with foreclosure proceedings, you may feel like you don’t have any options. In fact, you may have tried to call the bank to work out an arrangement and were denied.
When you file for bankruptcy, an automatic stay is issued that puts an immediate stop to all debt collection action, including foreclosure. So long as your bankruptcy case is active, the bank cannot move forward with foreclosing on your home.
Debt Reorganization Plan
The second part of a Chapter 13 bankruptcy filing is to create a debt reorganization plan that is actually affordable for you. The bankruptcy court will look at your income, your personal expenses, and your debt, and it will create a repayment plan that lasts three to five years. You will have a monthly payment that is considered affordable for your budget.
Any back payments you owe to your mortgage lender will be included in that repayment plan. You will be paying your regular mortgage each month, plus a little bit extra through your bankruptcy repayment plan.
Hiring a bankruptcy attorney in Gilbert is a smarter choice than trying to negotiate with the bank directly. Typically, the bank will deny your request. If it agrees, it will typically want you to pay off what you owe much more quickly than the bankruptcy repayment plan allows.
You might think that you have to pay everything you owe on your home since your debt is backed by the value of your home. In other words, if you don’t pay, the bank has the right to sell the property to cover what you owe. That’s how you got into foreclosure trouble in the first place.
However, that’s not always true. The bankruptcy court will determine what you can afford to pay. If you haven’t paid off your full debt at the end of the repayment plan designed for you, the debt may be discharged. The debt could be for principal on the property, or it may be for the interest and penalties that the bank charged you. Either way, you get free of the debt you can’t afford to pay, and you get back to a budget that actually fits your income.
Filing for Chapter 13 bankruptcy in Gilbert is a smart strategy for dealing with foreclosure proceedings against your home. You can use it if you are worried about foreclosure action being taken, or you can use it to put an end to current proceedings. Chapter 7 bankruptcy will not stop foreclosure proceedings. However, it could help you avoid foreclosure by discharging debts and freeing up money for you to pay your mortgage so you don’t fall behind (or to pay what you already have fallen behind). Talk to a bankruptcy attorney near Gilbert about the best strategy for your financial circumstances.
Call Gilbert Bankruptcy Lawyer to learn about your options for debt relief through bankruptcy. Talk with a bankruptcy attorney about Chapter 7 bankruptcy and Chapter 13 bankruptcy to learn what benefits each has to offer and how they might help you meet your particular goals. A bankruptcy lawyer will review your financial circumstances and make tailored recommendations to get maximum debt relief and protection. We serve clients in Gilbert and the surrounding areas, including both individuals and businesses interested in bankruptcy. Call us in Gilbert today to talk with a bankruptcy attorney about your options for debt relief.