Medical issues, job loss and other unexpected events can all cause a person to get behind on mortgage payments. If you are behind, you might be worried about losing your home. You may wonder “how many months behind on mortgage before foreclosure?” The lender may start foreclosure proceedings once you are three months behind on your mortgage. Once you are 4 months behind on mortgage payments, it can seem impossible to get caught up.
Although lenders may offer programs to help homeowners work things out, such as loan modification, it can be difficult to navigate the paperwork needed to qualify for these programs. You may learn that you don’t qualify— even after taking months to fill out the paperwork.
The Foreclosure Process
During a foreclosure, the lender repossesses your home and sells it at a public auction. The sale proceeds are then used to repay the bank and any costs. You might think that a foreclosure will get you off the hook for what you owe on the mortgage, but that is not correct. If your home sells for less than the mortgage—and it likely will if you are in foreclosure—then you will still have to pay any deficiency. A deficiency judgment can leave you on the hook for thousands of dollars.
Options to Avoid Foreclosure
Foreclosure usually takes several months. Usually, once someone is 4 months behind on mortgage payments, the foreclosure process begins. Fortunately, you have options before the bank sells your home at a public auction. So, can a chapter 13 stop foreclosure? Yes, a Chapter 13 Bankruptcy can help you save your home and prevent deficiency judgments. Here are some of the advantages of a Chapter 13 Bankruptcy:
Chapter 13 Bankruptcy
Fortunately, you have alternatives to not losing your home. Chapter 13 Bankruptcy is an option that can help you in several ways.
Stops Collection Efforts
When you file for a Chapter 13 Bankruptcy, the court will issue an automatic stay. This stay immediately stops all foreclosure proceedings until the court approves your Chapter 13 repayment plan.
Helps You Get Caught Up
A Chapter 13 bankruptcy allows you to pay your debts over a period of three to five years. Your attorney will help you develop a repayment plan. If you intend to keep your home, your Chapter 13 plan can include provisions for paying off your mortgage delinquency or arrearage. So, you can pay off your delinquent amount over several years while also making your current payments.
If the bankruptcy judge approves your Chapter 13 repayment plan, your lender will be bound to follow the plan and cannot foreclose on your home as long as you do not fall behind on mortgage payments while in chapter 13.
Eliminate 2nd and 3rd Mortgages
If you have a second or third mortgage and have fallen behind on mortgage payments refinance, a Chapter 13 bankruptcy might be able to get rid of your payments on those mortgages. The bankruptcy court may allow you to get rid of the 2nd and 3rd mortgage by categorizing them as unsecured debts. What this means is that they would take last priority in your Chapter 13 repayment plan. You might not have to pay them in full or—in some cases—not even pay them at all.
You might be able to lower your monthly mortgage payments with a Chapter 13 bankruptcy, especially if you have second or third mortgages. You may be able to get a loan modification during chapter 13 to help reduce your payments on your mortgage.
What Happens to a Mortgage Loan After Chapter 13 Discharge?
Once your chapter 13 bankruptcy is discharged, your mortgage loan will be current. Bankruptcy can help you bring your mortgage payments current and prevent your lender from foreclosing on your home. For more information about a chapter 13 discharge mortgage, click here.
Are You Facing Foreclosure? Contact an Experienced Bankruptcy Attorney to Discuss Your Options
If you are worried that your mortgage company may foreclose on your home, then you need a lawyer that is experienced in bankruptcy. Contact us at (818) 254-8413 for a free legal evaluation. You can also visit us on the web for more information and resources.