How Bankruptcy Can Help Stop Foreclosure In A Divorce

Stopping Foreclosure During Divorce

How A Chapter 7 Or Chapter 13 Bankruptcy Can Stop ForeclosureThose faced with foreclosure in Tucson Arizona, may look to bankruptcy as an option to keep their homes. Using a Chapter 7 to file for relief from the court, can actually cause a stay to be placed on the collection activity, and all foreclosure activity will come to a halt. While this will just give a few months reprieve, others have been able to save their homes by using a Chapter 13 plan.

When a homeowner falls behind in their payments, the lender has the right to file foreclosure to regain control of the property. People fall behind for all kinds of reason in Mesa Arizona, like divorce. Once a person is in arrears, the lender will try to resell the property to recuperate a percentage of their funds. Foreclosure is an intense process with a lot of steps, one of which is notification of the homeowner. With all of the red tape that a lender must go through to get a foreclosure action, it takes months to actually complete this type of legal proceeding. Because of the time and money involved in a foreclosure, a lender usually waits until a person is significantly behind in their mortgage to begin this type of action.

Lenders are also willing to negotiate other options to avoid heading to court over the property. One method that is used to cure a default is called deed in lieu of foreclosure. Lenders may also look at loan forbearance or a short sale as a way to resolve the debt. However; with today’s economy, many have tried these options and still find themselves facing foreclosure. As a last opportunity to save the home, involving the courts should be considered.

As soon as a voluntary petition is filed in court, an automatic stay will go into place. This stay will be placed for both chapters 7 or 13. All collection activities on the property must stop immediately. Any foreclosure sales that are planned must be postponed and this lasts during most of the bankruptcy period. Most people will find that they can get a reprieve from collection activities for about 3 months.

While this is a good strategy, it is not full proof, those facing divorce may find this as their only option. The lender can file a motion in court to lift the stay and resume foreclosure proceedings. If this is the case, a family facing foreclosure may only get a reprieve of a couple months, but still it is time to figure out what to do. Some states, like California, say that the law must give sufficient notice of foreclosure. If the bank gives at least a three month notice, and the customer has been notified before the court proceedings, a lender may file a notice to lift the stay and ask for the foreclosure proceedings to continue as planned.

If the loan payment is far behind, but a family wants to keep their home, Chapter 13 can help. This chapter allows a person to pay off all arrearage over the proposed payment plan time. A person will need to prove to the court that they can continue to meet the monthly payment obligations of the home, along with their reorganization plan. If the repayment plan pays off all arrearages, the court is likely to approve this arrangement. Another benefit of this chapter is for those who have two and three mortgages on their homes. These payments can be completely eliminated and the first mortgage can stand good for the value of the home. These extra mortgages can be classified as unsecured debt and wrote off in the chapter 13 repayment plan. While it is not an ideal option to keep a home, bankruptcy can certainly give a person with little options the help they need.

Guest Blog Published By:

The Bornmann Law Group
1731 W. Baseline Road, Suite 100
Mesa, AZ 85202
Office: (480) 263-1699

20325 N. 51st Ave., Suite #134
Glendale, AZ 85308
Office: (623) 640-4945

2 East Congress St., Suite 900
Tucson, AZ 85701
Office: (520) 306-8729

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