So you've had a few mishaps lately in your financial life-- like just about everybody else in America. And you've been working really hard to keep up the juggling act: spread the minimum amount of money around to the maximum number of creditors to appease them until you finally get a break. But that pesky mortgage payment is mucking up your system. It's so much larger than the rest of your bills, and, therefore, so much easier to fall behind on. The merciless late fees aren't helping the matter. Before you know it, you find you're four months behind and the prospect of ever catching up with the missed payments seems like a pipe dream.
It has become obvious that the juggling act just isn't working anymore. The pressure by your mortgage company is mounting, and the severity of the situation hits you like a ton of bricks: you will lose your home if you don't do something.
Since it is a secured debt, a mortgage comes with the risk that the lender will foreclose and actually have you and your family removed from the home. Few people ever imagine this could happen on the happy closing day when they signed that phone-book-sized stack of papers. But now, more than ever, many Americans are learning a lot more about foreclosure than they ever wanted to know.
In general, there are two types of foreclosure: 'judicial' and 'nonjudicial' foreclosure. A judicial foreclosure begins when the lender files a lawsuit against you. A nonjudicial foreclosure only requires the lender to file documents with the county clerk or another local official and mail copies to you.
After all of the requisite paperwork and notices are filed, a public auction, also known as a 'foreclosure sale- is held and members of the public have the opportunity to bid on the foreclosed property. Once the sale is complete, the successful bidder can evict the borrower from the premises.
If you are at the precipice of foreclosure and the idea of standing at the curb with your personal belongings strewn around you is not a scenario you ever wish to find yourself in, you may want to look into filing a Chapter 13 bankruptcy. The Bankruptcy Code recognizes the importance of home ownership and the need to protect what is usually a family's largest and most important asset.
Chapter 13 can help you catch up on back mortgage payments. Immediately after a Chapter 13 filing, the mortgage lender will be stayed (prevented) from foreclosing during the bankruptcy procedure. You may live in the home as the details are worked out and a plan is put in place for you to repay the arrears on your mortgage. The repayment plan includes past due principal and interest, and penalty fees, and usually lasts for a period of five years. The bankruptcy trustee may be able to challenge excessive fees and penalties imposed by lenders. This will put you in a better position to get current on your mortgage and keep your house.
During this time, you must also make the normal mortgage payments that are due, but remember, that Chapter 13 will increase your ability to pay by discharging some or all of your unsecured debt. It is often the unsecured debt-- the medical bills, the credit card debt-that was at the root of the homeowner's failure to keep current on the mortgage payments in the first place.
It is essential to contact a lawyer as soon as possible after foreclosure procedures are threatened. If you do not file a Chapter 13 before the foreclosure sale is imminent, you may also be tagged with additional fees for the foreclosure proceedings on top of everything else. Remember, Chapter 13 will not eliminate your responsibility to pay your lender what you owe under your mortgage contract, but it will give you breathing room to stave off foreclosure and save your home.