The thought of losing your home in foreclosure is frightening. Most people try everything within their power to catch up on mortgage payments to avoid foreclosure. They cut expenses, get a second job, and use all their savings or retirement to try to keep their home. However, there could be a better way. Our Goodyear foreclosure attorneys can help you explore Chapter 13 as a way to avoid foreclosure.
If you are behind on your mortgage payments, don’t wait until the bank begins foreclosure proceedings. Contact our office now to find out how a Chapter 13 bankruptcy case saves your home from foreclosure.
What Happens During a Foreclosure Action?
A mortgage is a secured debt. You pledged your home as collateral for the mortgage loan. If you do not pay the mortgage payments, the bank can foreclose on the mortgage. Foreclosure is the legal process of seizing your home, selling the home, and using the sale proceeds to pay the debt you owe.
A mortgage company could legally begin foreclosure proceedings as soon as you are late with your mortgage payment. In reality, most lenders wait several months or longer before they file a foreclosure complaint. It is simple. The bank wants your money, not your home. However, if you do not catch up on the mortgage payments and remain current, the bank has no other option but to foreclose on the home.
In most cases, you receive numerous letters from the mortgage company demanding payment and threatening foreclosure. At some point, a letter arrives from an attorney. The attorney gives you a deadline to pay the amount due or face foreclosure. Each bank and each foreclosure attorney follow different timelines and procedures.
Never assume that you have months before a foreclosure is filed or that the bank or attorney will contact you numerous times. You should assume that if you are behind on your mortgage payments, the bank can foreclose at any time.
Arizona foreclosure laws require that you receive a copy of the foreclosure complaint when it is filed. You have a short deadline to file an answer or response with the court. Ignoring the complaint results in a default judgment. Once the judge issues the foreclosure order, your home could be sold within 30 days, depending on the schedule for the foreclosure auctions.
Once your home is sold at a foreclosure auction, there is nothing that you can do to get the home back. However, if you file a Chapter 13 bankruptcy case before the home is sold, you stop the bank from selling your home at a foreclosure sale.
Chapter 13 Bankruptcy and Foreclosure
A Chapter 13 bankruptcy plan allows you to catch up your past-due mortgage payments over 60 months. Spreading out the mortgage arrearage (past due amount) over several years can make it possible to keep your home. Many people can afford to keep their homes, but they just need a little help catching up and getting back on their feet after a financial crisis.
That is what a Chapter 13 bankruptcy filing does for you. It gives you the chance to recover after a financial hardship by restricting your debts into an affordable monthly plan.
In addition to the past due mortgage payments, you may be able to reduce your car loan payments in Chapter 13. You may even lower the amount you need to pay to release the lien on your car. It depends on how long you have owned the vehicle, your car’s fair market value, and the amount you owe to the lender.
Unsecured debts, such as medical bills, credit cards, and personal loans, are also included in a Chapter 13 plan. However, these creditors usually receive a small percentage of what you owe on the account. When you receive your bankruptcy discharge, the creditors cannot try to collect the remaining amount owed on the account.