One of the scariest things about facing financial problems is the prospect of losing one’s home.
If a New Jersey family falls behind in its house payments, even if it is because of difficult circumstances, most lenders will not hesitate to start the foreclosure process. Ultimately, the bank will sell the family’s home to satisfy its loan.
There are some other options outside of bankruptcy the family may want to try if they want to save their home. In some cases, the family may be prepared to walk away from their home and find more affordable living arrangements.
Still, a family should be aware that bankruptcy may be able to help them protect their home.
Chapter 7 bankruptcy offers limited help to those trying to save their homes
At a minimum, most Chapter 7 bankruptcy filings can delay the foreclosure process. In most cases, the filing will impose an automatic stay on all of a family’s creditors, including a mortgage lender.
This means that as long as the home has not actually been sold, a family can use a Chapter 7 to delay foreclosure. Sometimes, this delay could be just the opportunity a family needs to get their financial affairs in order and negotiate a plan that will allow them to keep their home.
However, a Chapter 7 will not prevent a bank from foreclosing on a home in the long term. It may prevent the bank from pursuing the debtor’s other assets or wages, but the bank will keep the right to enforce its mortgage.
A successful Chapter 13 can allow a family to catch up on mortgage payments
A family who is intent on saving their home may therefore want to consider using a Chapter 13 bankruptcy if they have a steady enough income to make regular payments.
Through a Chapter 13 repayment plan, a family can agree to catch up on their mortgage while continuing to make the regular monthly payments going forward.
If the plan gets approved and the family follows through on it, the lender will have no basis to move forward with a foreclosure since the loan will be caught up.