Stop Foreclosure – Save Your Home
Losing your home can be devastating. There are many reasons homes fall into foreclosure – loss of a job, reduced income, or an adjustment to the interest rate in your mortgage that raises the payment to the point that the home is no longer affordable. Many are surprised to learn that there are many valuable tools in bankruptcy that can help you to save your home from foreclosure.
Stopping the Sale of Your Home
If you have received a Notice of Trustee Sale on your home you are well into the foreclosure process and are at risk of losing your home. Filing for bankruptcy can help. Immediately upon the filing of your bankruptcy case the bankruptcy court issues an order that stops all collection efforts against you – including the sale of your home. This is true even if the bankruptcy case is filed within hours of the trustee sale (although if possible it is better to prepare the bankruptcy well in advance of the sale).
Getting Those Missed Payments Caught Up
If your home is at risk of being foreclosed on you are undoubtedly behind on your mortgage payment. Most banks will start aggressively moving towards foreclosure of the home once three to four payments have been missed. While filing bankruptcy will immediately stop a scheduled sale of your home, you are still going to be required to get caught up on your missed house payments. In a chapter 13 bankruptcy you will be allowed three to five years to get caught up on missed payments with no additional interest accruing on those missed payments. It is important to note that once the bankruptcy case is filed you will be required to begin (or continue) making the regular monthly payment as it comes due each month.
“Lien Stripping” – Eliminate that Second Mortgage or Home Equity Line of Credit (HELOC)
Many (if not most) of the homes here in Arizona are upside down – owing more than the home is worth. This in large part due to large second mortgages or HELOCs. The good news is that through a chapter 13 bankruptcy your second mortgage or HELOC may be able to be completely removed through a process called “lien-stripping”.
In order for your second mortgage or HELOC to be eliminated the value of your home must be less than what you owe on your first mortgage. For instance, if you have a first mortgage of $200,000, and a second mortgage of $50,000, and your home is now worth $150,000, then we would be able to eliminate the second mortgage. If however, your home is worth more than what you owe on your first mortgage, then you would not be able to eliminate the second mortgage. Same example as above, however this time the value of the home is $205,000, you would not be able to remove the second mortgage.
Loan Modifications and Bankruptcy
Most of my clients have either applied for a loan modification or are in the process (the very long process) during their bankruptcy case. Initially, I have not seen the filing of a bankruptcy case pose any problems in obtaining an approval on a loan modification. If you obtain approval of your loan modification during bankruptcy it is required that we seek court approval, but I have not experienced any problems in obtaining court approval.
One important note…the bankruptcy court cannot modify your first mortgage if your bank doesn’t agree. The Bankruptcy Code specifically prohibits the bankruptcy court from changing the terms of your first mortgage payment unless the bank agrees to those changes.
If you are having trouble making your house payment or if your there is a trustee sale set on your home right now, give me a call and we can discuss what your options are. I offer a free bankruptcy consultation where we can put a plan together for you.
Arizona bankruptcy attorney John Skiba can be reached at (480) 420-4028.