Can Bankruptcy Help Save Your Home From Foreclosure?

by Susanne Robicsek, North Carolina Bankruptcy Attorney

January 17, 2009

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Bankruptcy can help save homes from foreclosure in a few ways.  Under the present laws, filing either a Chapter 7 or a Chapter 13 bankruptcy will stop a foreclosure, but you will have to cure the mortgage somehow.

Chapter 7 is a temporary stop to the foreclosure, but might give you a short time to sell or refinance the property.

Most people who want to save their home will file Chapter 13 bankruptcy to get time to cure the mortgage arrears.  They normally have to be in a position to make the ongoing (regular) payments in addition to whatever Chapter 13 plan payment is required.

Chapter 13 will give you up to five years to catch up the missed payments, or a longer period to sell or refinance.  Exactly how this would work must be looked at on a case by case basis, and you should speak to an experienced bankruptcy lawyer in your town to determine what you can do.  Many plans include a reduction or elimination of unsecured debts, like credit cards, loans or medical bills.

Right now, if someone has residential mortgage payments that they can’t afford to pay, even Chapter 13 bankruptcy can’t help modify the ongoing mortgage payments.  Under current bankruptcy law, you can’t modify a residential mortgage in bankruptcy, except to provide for the cure of the past due payments.

That is not expected to change soon, but there is always hope that Congress will look at changing bankruptcy law to allow mortgage modification and allow bankruptcy judges to oversee modification of residential home mortgages.

Until then, eliminating other debts and lightening the load of your budget may be just the answer you are looking for to help save your home.

A balanced budget, a fresh start, and becoming debt free except for the mortgage is the usual goal of filing for bankruptcy.  Keeping a family in their home, providing some peace of mind, and getting control of the budget are the extras found by many.

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Concentrating in Consumer Bankruptcy Law since 1988; Wake Forest Law School JD 1987 Law Office of Susanne M. Robicsek since 1993, Law Clerk to Judge Rufus Reynolds, US Bankruptcy Judge for Middle District of NC; Burns Price & Arneke, PA, David Badger and Associates, PA.

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Last modified: August 21, 2013