Filing a personal bankruptcy triggers an “automatic stay” that suspends debt collector harassment, repossession efforts, pending lawsuits from creditors, foreclosure and wage garnishment. Homeowners, who want to keep their homes, may qualify for a Chapter 13 bankruptcy that enables them wipe out some debts and catch up on mortgage payments over a period time. In some cases, filing bankruptcy may eliminate a second mortgage that is no longer supported by the market value of the home, which can substantially reduce your overall debt.
Individuals who attempt loan modifications may file a Chapter 13 bankruptcy to prevent further mortgage debt from accumulating. It is not uncommon for homeowners who apply for a mortgage modification to wait for several months before being considered for a mortgage modification. If they are unable to pay their mortgage the interest, penalties and late fees will accumulate and the lender may also proceed with foreclosure. However, foreclosure and fees can be suspended if the borrower initiates a Chapter 13. You can remain in your home while the bankruptcy is in progress. If you successfully complete Chapter 13, you will be able to avoid foreclosure.
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