The filing of a Bankruptcy will without question stop the foreclosure of your home if filed prior to the scheduled sale. In fact, it will stop all creditors and their efforts to acquire any of your property.
Why then would filing for Bankruptcy relief not be the right choice? First, it is the right choice as often as it is the wrong choice. Most everyone wants to stay in their home and while the filing of a Bankruptcy will stop the sale, that decision might not be the correct one for everyone. You need to thoroughly understand your options and the ramifications of same. This country’s economic crisis has caused many people to make decisions that they would not have made ten years ago. The world and the rules have changed and the need for an attorney who understands the legal nuances has never been more important.
You will discover after meeting with a competent seasoned attorney at Pitts & Burns that there are lots of factors to consider before stopping a foreclosure or filing a Bankruptcy.
There should be lots of thought and planning before you file for Bankruptcy relief. First, have you exhausted all other remedies. If so, then you need to decide whether you want to stop the sale. While that seems like a stupid question, it is not. There are lots of reasons to stop the foreclosure and just as many reasons not to.
Too many people file for Bankruptcy to stop a foreclosure sale because either they have not taken a practical and pragmatic look at their financial situation or they are being guided by misconceptions about foreclosure and Bankruptcy. As to the latter, too many people believe that if the sale goes through that they will be out on the streets the same day. This is just not the case. The mortgage bank or the new owner that purchases your home at the foreclosure sale will need to evict you through the District Court in the State of Rhode Island. This takes time and more often than not, you will continue to reside in your home for months after the sale.
The people who maybe should not be stopping the foreclosure sale are those who have not really considered the following questions:
- If I file for Bankruptcy before the foreclosure sale, will that correct my default? No, if you file a Chapter 7 and owe arrearage to the bank, they will file for authorization to start the foreclosure right up again. The mortgage companies in a Chapter 7 are secured and therefore have a right to the security backing their loans: your home. Therefore, the filing of a Chapter 7 is merely a temporary delay. Moreover, the Bankruptcy Court is a Federal Court and the filing of a Bankruptcy in bad faith could result in undesirable results. The Court is not there to stop your foreclosure haphazardly. Once you file a Chapter 7 you are in with very little chance of ever dismissing it if you discover that you made a poor choice.
The filing of a Bankruptcy is very complicated and even most attorneys do not understand it.
2. When is the right time to file a Bankruptcy? You need to decide what your objectives are. If you are ready to leave your home and discharge your debt, then do not file until after the foreclosure sale. You will have sufficient time to relocate after the sale. The filing of your bankruptcy after the foreclosure allows you to name all creditors associated with the ownership of your home. Therefore, you will have drawn a very definite line allowing you to go on with your life with no concerns of loose strings that might haunt you in the future.
When someone files before a foreclosure sale, their bankruptcy only relieves them of the debt that existed prior to the filing. Therefore, that individual will still have ongoing debt for real estate taxes, municipal services, condominium fees, utilities and the list goes on. Even worse than that, you might find after you stopped the foreclosure that the bank decides not to foreclose. This is happening more and more. People are discharging their debts and leaving their homes to find out that they still own them. As an owner of property you continue to be responsible for ongoing municipal debts and for any accidents that might happen on the property in your absence.
If you can afford your mortgage payments though and just fell on hard times for a while and developed a sizable arrearage with your mortgage company, but are on your feet again, then a Chapter 13 filed before the foreclosure sale is the way to go. The Bankruptcy filing will stop the sale and then through a well-designed financial Plan approved by the Bankruptcy Court, you can pay off the arrearage over time. How much time and how much you will need to pay the Bankruptcy Court will depend on numerous facts that require a full analysis by a competent bankruptcy firm like Pitts & Burns, Attorneys At law. Do not trust your assets and family to the advice of just any attorney.