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Stopping Foreclosure Without Bankruptcy

When a mortgage payment is more than 30 days late, the mortgage lender has the right to declare the mortgage in default. This means that the homeowner must pay off the mortgage or else a foreclosure lawsuit will be started to sell the home at a sheriff’s auction sale. As a practical matter, most lenders will not start a foreclosure until the borrower is three months past due in payments.

After a lawsuit is started some lenders will refuse to accept payments unless sufficient to pay off the mortgage in full. Rarely was any homeowner able to come up with the full principal, interest, legal and other fees charged by the lender. Therefore, many were forced into taking advantage of the Chapter 13 bankruptcy laws. The Chapter 13 bankruptcy plan may permit homeowner to get caught up over a 36 to 60 month period. Certainly, the homeowner who files a Chapter 13 must pay the mortgage rate of interest. Chapter 13 is a powerful, effective tool available to home owners who do not want to lose a home. It should not be entered into lightly. There is more information on Chapter 13 throughout this web site.

Some lenders have loss control departments where the homeowner may be able to negotiate a way to get caught up outside of having to file a bankruptcy. Certainly, this is worth exploring as soon as the homeowner begins to anticipate that a payment will be missed. This catch up method is voluntary with the lender. The benefit to the home owners is that is avoids both bankruptcy and foreclosure. Certainly, this is cheaper and there is no bankruptcy filing on a credit report. It is well worth the homeowner making the phone call to the lender or the lender’s ‘servicing agent’.

If the home owner can not take advantage of the New Jersey Fair Foreclosure Act and can not get the lender to agree to a cure plan the homeowner can handle, Chapter 13 bankruptcy may be the best answer. It stops a foreclosure dead in its tracks. The lender must obtain the Bankruptcy Court’s permission to continue. This is not always granted.  

This is the goal of most Chapter 13 cases. Hopefully, home owners facing foreclosure will be able to avoid bankruptcy. While it should be regarded as the debt management tool of last resort, a Chapter 13 is both drastic and powerfully effective to keep family homes. While some people fail even in Chapter 13s and risk losing their homes, many are able to successfully complete plans and/or refinance their way out of a Chapter 13 with the approval of a bankruptcy judge.

Homeowners experiencing financial problems should carefully weigh all of their options. Bankruptcy proceedings are not always the ‘magic bullet’ that addresses all financial problems. A Chapter 13 is an option that should be considered.