Stop Foreclosure and Regain Control of Your Life Through Bankruptcy

Stop Foreclosure and Regain Control of Your Life Through Bankruptcy "Similar to a car loan, a mortgage loan is secured debt because the amount owed is secured against the tangible possession of the real property (the house or car). This means that if the debtor begins to miss payments or is otherwise deemed to be in default (by making partial payments or conducting an unauthorized transfer of the property, for example), the lender has the right to reclaim the property that secured the debt: to foreclose on the house or to repossess the car. The precise details of what is permitted, when, and under what conditions vary widely, but it is certain that bankruptcy cannot provide enduring relief for secured debt. However, bankruptcy can be used as an effective delaying tactic to prevent an immediate property foreclosure or vehicle repossession.The court immediately issues an Order for Relief when a Chapter 7 or Chapter 13 bankruptcy petition is lodged. This court order includes a ""automatic stay"" that requires creditors to promptly cease all collection efforts, including foreclosure. As soon as the bankruptcy court issues the Order for Relief, all foreclosure proceedings are halted until the bankruptcy case is resolved. This was a major factor in why the institutional lenders who drafted the 2005 bankruptcy law made it much more difficult and time-consuming for debtors to file their initial petition by adding the means test, credit counseling requirements, and other obstacles to a speedy filing.Chapter 7 bankruptcies can only provide the debtor with temporary relief between the initial submission of the petition and the resolution of the case through dismissal or debt discharge. This implies that Chapter 7 may offer a debtor relief from foreclosure for three to five months. Nonetheless, once the Chapter 7 case is resolved (regardless of its outcome), this protection is lifted and the mortgage lender may resume foreclosure proceedings. In addition, mortgage lenders can file a Motion to Lift the Stay with the court, which may enable them to proceed with a foreclosure even if bankruptcy proceedings are ongoing. In general, courts are more receptive to this argument if the foreclosure process is nearly complete when the Order for Relief is issued.Chapter 13 bankruptcy can provide up to five years of protection from foreclosure and help debtors strip away second and third mortgages by converting them into unsecured debt (since the equity they are based on cannot be separated from the real property, the first mortgage retains its status as secured while home equity loans are converted into unsecured debts). Obviously, the debtor must have the required income for a Chapter 13 bankruptcy (which amounts to court-ordered debt restructuring) and must adhere to the Chapter 13 plan to the letter (otherwise, the bankruptcy is dismissed and the debtor is left without protection).
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