Bankruptcy & Foreclosure – Saving Your Home

In this current downturn in the economy foreclosures have become commonplace.  A combination of high unemployment rates, depreciating home values, and adjustable rate mortgages have resulted in record high foreclosures rates.

If you are in danger of losing your home, bankruptcy can help.  Bankruptcy will stop the foreclosure sale, allow you time to get caught up on missed payments, and even allow you to eliminate your second mortgage or Home Equity Line of Credit (HELOC).

Or, if you need to surrender your home back to the bank, doing so within a bankruptcy will help you avoid any balances that may be owed after the sale takes place and help you avoid any possible negative tax consequences.

Bankruptcy Will Stop the Foreclosure of Your Home

If you have received a notice that they are going to sell your home at a trustee’s sale, you are in imminent danger of losing your home.  Filing a bankruptcy case will put a stop to the foreclosure sale.  Immediately after a bankruptcy case is filed the bankruptcy court will issue an order that stops all collection efforts against you and your property.  This means that not only will creditors not be able to call and harass you, but that the pending foreclosure sale on your home will be vacated.

The order issued by the bankruptcy court will stop the foreclosure of your home immediately.  This means that even if your house is to be sold the very next day, a bankruptcy filing will stop the sale.

Bankruptcy Will Give You Time To Get Caught Upon On Missed Payments

The filing of a chapter 13 bankruptcy will not only stop the sale of your home, but it will give you an opportunity to get caught up on your missed house payments.  Chapter 13 bankruptcy cases generally last three to five years.  During this time you will be permitted to pay the missed payments and stay in your home.

Lien Stripping – Eliminating Your Second Mortgage or HELOC Through Bankruptcy

Many of the chapter 13 bankruptcies I file are for people who are having difficulty with their mortgage payment.  In Arizona particularly, a big problem is that people’s homes are worth considerably less than what they owe – especially if there is a large second mortgage or HELOC.

In a chapter 13 bankruptcy we can eliminate your second mortgage or HELOC, making it not only more affordable on a monthly payment basis but overall you will owe much less on your home.  The catch to the lien stripping is that the value of your home must be less than what you owe on your first mortgage.  For example, if you owe $150,000 on your first mortgage, then the value of your home must be less than $150,000 for you to be able to remove any additional or junior liens.

Surrendering Your Home Through Bankruptcy

If you have made the decision that you are going to surrender your home to the bank, there are potential liabilities that need your consideration.  First, depending on what your loan was used for (i.e. buying the house, cash to start a business, or to buy another home, etc.), you may have liability for any balance owed after the foreclosure sale.  Second, you may have tax liability on any amounts forgiven by the bank.

Both of these concerns are eliminated by surrendering your home through a bankruptcy.  After surrendering your home through bankruptcy you will not be held liable for any balances still owed and you will not be held liable for any possible 1099 tax liability.

Set Up a Free Bankruptcy Consultation Today

I offer a free bankruptcy consultation where we can discuss your specific situation and determine if bankruptcy is a good option to help you protect your home or if there are non-bankruptcy alternatives that will help you with your debt problems.

Arizona bankruptcy attorney John Skiba can be reached at (480) 420-4028 or via email at john@skibalaw.com .