Can Filing Bankruptcy Stop a Foreclosure?
You might have found yourself in an unfortunate situation where you think your house will be foreclosed on in the near future. You probably even considered bankruptcy because you just can’t seem to find your way out of the financial hardship. Let’s looks at the effects of bankruptcy on the possible primary residence foreclosure.
Can Filing Bankruptcy Stop a Foreclosure
Bankruptcy can stop the foreclosure process, it can help you catch your breath, stop harassing phone calls from the debt collectors, give you time to catch up on missed payments and take control of your finances. In some cases, bankruptcy can help save your home.
It is not a solution for every homeowner, however. Bankruptcy won’t help the homeowner who just doesn’t have enough money or doesn’t have an ongoing income. However, the homeowners who had been making payments and have the means to continue making payments in the future can potentially save their homes.
Which Bankruptcy Type Stops Foreclosure
The most commonly used chapters to stop the foreclosure are Chapter 11 and Chapter 13.
The homeowner must propose a plan to the lender or lenders to deal with the amount owed. The repayment plan you can propose may take up to 60 months to catch up on past due amounts. It is important to note that you should be eligible for Chapter 11 or 13 bankruptcy and have the regular income that will be sufficient to cover such plan.
In the case of Chapter 13, the court must agree to an income-based budget with monthly payments made to trustees. The trustees first pay the secured debt, or your mortgage. After the secured debt is paid, the trustees will pay unsecured debt. The good news is, the borrowers, assuming they kept on with the payments, can emerge on the other side with the home still in their possession.
The courts can’t reduce the amount owed on the mortgage or reduce the interest rates. The courts can “strip off” home equity loans or lines of credit by downgrading them to unsecured debt, if the home’s value is below the value of the mortgage balance.
What Happens after the Foreclosure Sale is Stopped
After the foreclosure sale is stopped, you need to propose a plan to deal with your debts. Chapter 13 gives you the most time, up to 60 months, to catch up on payments and recover your loan. However, you also need to be able to pay your current mortgage payment. You need to make sure you have the money for the extra payments in addition to your regular living expenses.
When to Get Foreclosure Advice
Do not wait to get foreclosure advice. Never wait until a few days before foreclosure to contact your attorney. One of the biggest mistakes people make is waiting too long to seek professional help. Dealing with banks is always a time-consuming process, you definitely don’t want to wait till the last minute. Wishful thinking and hiding your head in the sand won’t help you with the foreclosure process. It’s better to tackle the process head on and get professional advice as soon as possible.
The Ohio Foreclosure Process
In Ohio the foreclosures must go through court, they are judicial foreclosures. The process officially begins when the lender files foreclosure summons and complaint. In some cases, your lender might be required to send advance notices. Lenders have to wait until the borrower is more than 120 days delinquent on their loan. The hope is that the homeowner can explore other, less drastic measures, and avoid foreclosure.
Ohio doesn’t have a law requiring lenders to give notice to borrowers before they start foreclosure proceedings. Your mortgage loan agreement, however, may contain a provision requiring certain notices.
- Notice of default requires banks to give you a written notice before calling in a loan
- “Time to cure” allows the borrower to pay past due payments and charges before the bank moves forward with foreclosure
The lender will then file the notice with the court, the court will issue summons and you will receive a copy of the complaint. Read the documents very carefully, you have 28 days to respond to the complaint to the bank’s attorney and to file your response in court. If you don’t respond or file the answer late, the court may issue a default judgement against you. Going back to the previous point of contacting your attorney, don’t wait, seek professional help as soon as foreclosure proceedings had started.
Your case can be assigned to a magistrate court or the lender might file the motion for summary judgement, or a request that court rules in favor of the lender. Many courts in Ohio offer mediation as an alternative to litigation.
If the court granted judgement to foreclose, the next step in the foreclosure proceedings is sheriff’s sale of the home.
A professional bankruptcy lawyer can help guide you through the steps. If you need help with bankruptcy or foreclosure, don’t wait. Contact Amourgis & Associates and we will help you navigate the process.