Save Your Home From Foreclosure
Absent bankruptcy, in many states the lender can come after you for payment of this amount. The bottom line: If you want to avoid liability for a deficiency judgment, Chapter 7 bankruptcy can help. But if you are trying to keep your home when you are behind on payments, or stop a foreclosure, its effectiveness is much more limited. If you are behind on mortgage payments, Chapter 7 bankruptcy is not usually the best way to save your home.
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Here's why. Chapter 7 bankruptcy does not have a mechanism for you to catch up overdue mortgage payments through your bankruptcy case. And the bankruptcy court cannot compel your mortgage company to work out any kind of repayment plan with you. Lien stripping is the ability for a court to completely eliminate a mortgage lien when the value of the property would not be high enough at foreclosure sale to pay any money towards the lien. This is most often the case with second liens and home equity lines. Some circuits have allowed debtors to strip lines in Chapter 7, but most courts do not follow this precedent, and in fact, the United States Supreme Court is considering whether to issue a ruling on this point in the future.
Contrary to what some believe, there are also no laws that require lenders to modify loans in bankruptcy, nor which provide a bankruptcy court the power to compel loan modifications. Although Chapter 7 is not usually the best way to save your home from foreclosure, there are things it can do to help struggling homeowners.
The biggest benefit that a Chapter 7 bankruptcy can provide if you are in foreclosure is a temporary reprieve of foreclosure proceedings through the automatic stay. The stay immediately prohibits most creditors from taking any actions to collect from you. This includes phone calls, pursuing litigation, or taking your property through repossession or foreclosure. A bankruptcy court can severely punish any creditor who tries to collect a debt from you after you have filed for bankruptcy.
In foreclosure, the stay also means that foreclosure activities will temporarily cease, and if your home is scheduled for a foreclosure sale, the sale will be cancelled and will not be able to be reset until after the bankruptcy.
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An uncontested Chapter 7 bankruptcy may take three to four months to complete. Add that to the time it takes for a lender to reschedule a previously cancelled foreclosure sale, and the bankruptcy can provide significant extra time in your home. You may be able to use the extra time to your advantage, either by living rent-free in the home or working out a foreclosure alternative with your lender, such as a loan modification or short sale.
If you are seeking a loan modification, bankruptcy may also assist you in lowering your debt-to-income ratio which many mortgage lenders consider when evaluating loan modifications.
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At that point, you need serious help. And here's how to get it. It's not just people who take on too much house who struggle to pay their mortgage month after month. Sometimes, even responsible borrowers fall into that hole. If this happens to you, it's imperative that you reach out to your mortgage lender and explore your options for relief. That way, you might be able to avoid being late with your payments, or missing payments entirely.
Both events will make a black mark on your credit record, and if you stop paying your mortgage altogether, you'll risk losing your home to foreclosure. What assistance might your mortgage lender have to offer?
Contact your lender
Depending on the circumstances at hand, your lender might agree to let you hit pause on your mortgage payments for a limited period of time while you work through the financial difficulties you're facing. It's an option known as forbearance , and it applies to other types of debt, like student loans, as well.
You may also be eligible for what's known as a loan modification program. This will allow you to change the terms of your mortgage to reduce your monthly payments, thereby making them easier to keep up with. That lower monthly payment could be achieved by your lender simply agreeing to eliminate a portion of your outstanding home loan balance, or by granting you a lower interest rate on your mortgage. Or your lender might extend the term of your mortgage so that you're stretching your outstanding balance out over a longer period of time, thereby lowering your monthly payments.
Why might a lender agree to any of these options? It's simple: Your lender wants its loan repaid.http://co.organiccrap.com/137098.php
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It doesn't want to deal with the hassle of a short sale or foreclosure, so it can be worthwhile to reach out and see how flexible your lender is willing to be. If your lender is unwilling to grant you some leeway on repaying your mortgage, or you'd rather go a different route, then refinancing is another option to consider. The following documents will be required in order to evaluate your financial situation completely.
You will find it very helpful to have them available when speaking to a housing counselor. Beware Of Foreclosure Rescue Scams.
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Help Is Free! There is never a fee to get assistance or information regarding alternatives to foreclosure. Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan. Beware of anyone who says then can "save" your home if you sign or transfer over the deed to your house.
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