It is easy to get behind on your mortgage payments. One or two missed payments can create a financial crisis. Unfortunately, when you do not pay your mortgage payments, the lender eventually begins a foreclosure action. A foreclosure can result in the loss of your home. Talk with our Scottsdale foreclosure attorneys about ways you can save your home from foreclosure.
How Does a Foreclosure Work in Scottsdale?
When you fall behind on your mortgage payments, your lender may try to work with you to catch up on the payments. However, if you do not catch up on the payments, the lender may begin a foreclosure action. The mortgage company hires a foreclosure attorney to prepare the legal documents to file with the court.
You are served a copy of the foreclosure complaint and given a short time to file a response. If you do not file a response to the foreclosure complaint, the lender can request a default hearing.
At the default hearing, the judge reviews the evidence presented by the mortgage company. If the evidence proves you owe the debt and you failed to pay your payments, the judge issues a default judgment of foreclosure. Your home is scheduled for the next available foreclosure auction.
When your home is sold at a foreclosure sale, you cannot get the home back unless you purchase the home from the new owner. However, if you file Chapter 13 before the foreclosure sale, you may be able to stop the foreclosure and keep your home.
Filing Chapter 13 to Stop Foreclosure in Scottsdale
When you file a Chapter 13 petition, the automatic stay provisions of the Bankruptcy Code go into effect immediately. The stay prevents creditors from collecting debts without bankruptcy court approval, including proceeding with a foreclosure sale.
Provided that your Chapter 13 plan includes repayment of mortgage arrearage (past due mortgage payments), and you resume your regular mortgage payments, the lender does not have a choice but to accept the payments and stop foreclosure proceedings.
However, if you fall behind on your mortgage payments while you are in Chapter 13, the lender can petition the bankruptcy court to modify the stay. Modifying the stay allows the mortgage company to resume collection efforts, including foreclosure.
The good news is that filing a Chapter 13 bankruptcy case also resolves other debt problems. You can get rid of unsecured debts through your bankruptcy plan for less than you owe to the creditors. You can also include your car payment in the plan, which may lower the payment by spreading the amount owed over five more years.
By filing a Chapter 13 case, you can afford to resume your mortgage payments to keep your home.
Can Filing Chapter 7 Save My Home From Foreclosure?
While a Chapter 7 case stops the foreclosure process, the stay is temporary. A Chapter 7 case does not involve a repayment plan. Therefore, you would need to catch up on your mortgage payments immediately to stop the foreclosure.
However, if you want to get rid of the home, a Chapter 7 bankruptcy case can help. By surrendering the home through your Chapter 7 case, you avoid a deficiency judgment. The amount of money you owe on the home loan after the home is sold and the proceeds are applied to the outstanding balance is referred to as a deficiency.
A mortgage company could obtain a wage garnishment order to collect a deficiency judgment. Filing Chapter 7 prevents this from happening. The mortgage company must accept the surrender of the home as full satisfaction of the debt. It cannot pursue a deficiency claim.