Many people who live on Long Island or Westchester County may start exploring bankruptcy because they are facing the prospect of losing their homes in foreclosure.
Indeed, the thought of losing one’s residence can cause a great deal of fear and emotional distress, especially if arranging for other housing is difficult.
Bankruptcy can delay the foreclosure process
Sadly, many banks treat foreclosures more like one more process to get through as quickly and as inexpensively as possible, and this attitude can make it hard for families to negotiate directly.
In this respect, in most cases, filing bankruptcy will give a person the benefit of an automatic stay, which means a bank cannot continue with foreclosure. Moreover, the bank has to cancel a pending sale that has yet to take place.
The bank cannot pick up the mantle again until the bankruptcy ends or with permission from the court. Further, even though the bank is allowed to sell the home in foreclosure after a Chapter 7, the bank cannot pursue the borrower after doing so.
A Chapter 7 may help a debtor resolve a foreclosure
Chapter 7 bankruptcies legally can delay a foreclosure, but they do not stop them.
Still, the delay can give a person valuable time to re-arrange his or her finances and, possibly, to workout payment arrangements with the bank. The bankruptcy may even free up some additional funds a person can devote to paying down a mortgage.
Chapter 13 bankruptcies can stop foreclosures in the long term
For those who are able to afford a Chapter 13 bankruptcy repayment plan, the option may help them stop a foreclosure altogether.
The law allows a Chapter 13 plan to include catch-up payments that debtor can make over 3 to 5 years to resolve a delinquent mortgage. If they successfully complete this plan, the bank will have no basis to continue with their foreclosure.