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Foreclosure Resource Center

Chapter 7 and Mortgage Foreclosure

Chapter 7 bankruptcy is a liquidation bankruptcy. A Chapter 7 will typically eliminate:

  • credit card debt;
  • installment loans;
  • pay day loans;
  • medical bills, and most other unsecured debt.

In most cases consumers will keep all of their property. If you are facing foreclosure on your home, the automatic stay created by your Chapter 7 filing serves as a temporary defense against foreclosure. As opposed to Chapter 13 bankruptcy, Chapter 7 will give you a fresh start, but will not provide you with the opportunity to catch up with your mortgage payments.

However, Chapter 7 bankruptcy will allow you to discharge, or eliminate, any deficiency balance owed to your mortgage company if your home is sold for less than the outstanding balance owed to the mortgage company.

The Difference Between Chapter 13 and Chapter 7 Bankruptcy?

The biggest difference is that a Chapter 7 bankruptcy does not provide for the repayment of any debt. Chapter 7 cannot stop a mortgage company from foreclosing on property. Chapter 7 will temporarily delay the foreclosure proceeding, but it cannot provide the long-term protection of Chapter 13 because no plan to repay the mortgage delinquency is proposed.

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Chapter 13 Bankruptcy & Mortgage Foreclosure

Mortgage companies continue to foreclose on American homes at an alarming rate. The real estate market boomed in the late 1990’s and early 2000’s. Property values soared and homeowners cashed in on their new found home equity. However, interest rates have climbed, the real estate market has cooled and homeowners realize it’s a buyer’s market. Some homes will sit on the market for six, nine or twelve months. The asking price goes down and homeowners inch closer to the edge of foreclosure.

Many consumers do not understand that the bankruptcy code can help them save their homes from mortgage foreclosure. Chapter 13 bankruptcy is a very powerful tool that can save your home if you have fallen behind on your mortgage payments and you want to rescue your home from mortgage foreclosure.
What is a Mortgage Foreclosure:
Foreclosure is the legal proceeding in which a bank or mortgage company takes title to real estate due to the homeowner’s failure to make the agreed mortgage payments.

The downward spiral into foreclosure begins when your loan payment becomes 16 days overdue. At that point, your mortgage lender may try to contact you to work out a repayment schedule to bring your loan current. If your payments fall 90 days behind, the mortgage company will likely refer your mortgage to an attorney that will start formal foreclosure proceedings.

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Chapter 13 Bankruptcy Stops Foreclosure:

Chapter 13 bankruptcy is designed to stop foreclosure. In fact, stopping mortgage foreclosures is the driving force behind many Chapter 13 bankruptcies. As soon as you file Chapter 13 bankruptcy an “automatic stay” goes into effect. This “stay” stops your mortgage company from continuing to foreclose on your home. Your mortgage company cannot contact you in regard to your pre-filing mortgage arrears (the amount you are behind on the mortgage) while you are in the Chapter 13 bankruptcy.

How Does Chapter 13 Bankruptcy Work:

Once you prepare a Chapter 13 plan with your attorney, you will file a Chapter 13 petition for relief and the foreclosure proceeding will stop. The bankruptcy trustee will then recommend your Chapter 13 plan for confirmation and the bankruptcy court will approve a repayment plan that allows you to get current on your mortgage over a three to five year period. You must make all current mortgage payments that come due after the Chapter 13 bankruptcy petition is filed.

Homeowners must make all mortgage payments that come due during the Chapter 13 plan. If you fail to make your post-filing mortgage payments the mortgage company can ask the bankruptcy court to lift the protection of the automatic stay and the mortgage company can resume the foreclosure proceeding if the judge agrees with the mortgage company. The possibility of refinancing your mortgage after you have gotten back on track with your Chapter 13 plan is a real possibility for many consumers

When Should You File Chapter 13 Bankruptcy to Stop a Mortgage Foreclosure:

Generally, the Chapter 13 bankruptcy must be filed before the mortgage company sells your home. However, if you find yourself behind on your mortgage payments you ought to call an experienced attorney to explore all of your options before the situation spins out of control. The Chapter 13 bankruptcy filing gives homeowners the time they need to catch up on their mortgage payments.

Who Can File Chapter 13 Bankruptcy:

You can file a chapter 13 bankruptcy to stop a mortgage foreclosure, provided you:

  • Are employed or have a steady source of income;
  • Have enough income to make your Chapter 13 plan payments, and your current mortgage payments after the chapter 13 is filed.

Chapter 13 plan payments are fixed so that you can meet all your living expenses first and then pay any surplus income to creditors. Mike and Chad can help you structure a repayment plan that works for you and your creditors.

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Foreclosure Terms

Acceleration Clause

A provision that allows the lender to call the entire balance of the mortgage loan when the borrower fails to make some installment payments.

Affidavit

A written statement usually given while under oath or in the presence of a notary.

Appraisal

The process by which a licensed person gives an estimate of property value.

Annual Percentage Rate (APR)

The annual interest rate covering the interest and other costs. The Truth in Lending Act requires lenders to announce the APR.

Assignment

The transfer of property to be held in trust or to be used for the benefit of the creditors (lenders).

Balloon Payment

Large installment payment required at the end of the term of the mortgage note to pay off the entire mortgage balance.

Bid

The amount for a foreclosed property for sale at auction.

Clear Title

A title that is not burdened with encumbrances or defects.

Deed

A signed document that shows ownership in property and allows the transfer ownership of property from one party to another.

Deed In Lieu of Foreclosure

A transfer of title by the borrower to the mortgage company upon foreclosure.

Deed of Trust

An instrument signed by a borrower, lender and trustee that conveys the legal title to real property as security for the repayment of a loan. The written instrument in place of mortgage in some states.

Default

A mortgage is in default when the borrower fails to make the payments as agreed to in the original promissory note.

Deficiency Balance

A judgment against the borrower for the balance remaining after the property is sold at auction or foreclosure sale.

Encumbrance

Mortgage, lien, tax, or any restriction on the use of land.

Equity

The value of real estate less the outstanding mortgages and debts pledged against the property.

Fair Market Value

The price that property would sell for on the market.

Fee Simple

Common term used to indicate complete legal ownership of a property.

FHA

Federal Housing Administration under U.S. Department of Housing and Urban Development (HUD).

Foreclosure

Legal action taken by the lender when the borrower fails to pay monthly installments.

Grace Period

Period between the due and the overdue date during which no late payment penalty applies to the mortgage payment.

Hazard Insurance

Insurance against the destruction of the property.

Judicial Foreclosure

A foreclosure that is processed by a court action.

Legal Description

A formal description of real property so that one can locate it by reference to government surveys or approved recorded maps.

Lien

A claim, or mortgage, on real estate for payment of debt.

Lis Pendens

Pending lawsuit.

Mortgage

A written pledge that uses real estate to secure repayment of a loan.

Notice of Sale

A notice giving specific information about the loan in default and the proceedings about to take place. This notice must be recorded with the county where property is located and advertised as stated in the security document or as dictated by state law.

Order Confirming Sheriff Sale

An order signed by the judge confirming the sale of foreclosed property.

Posting

To publish, announce or advertise by physically attaching a notice to an object.

Refinance

Paying off one mortgage loan by obtaining a new mortgage loan.

Right of Redemption

A borrower’s right to reacquire property lost due to a foreclosure. This right allows the owner to recover property lost to a foreclosure judgment, or sold after a foreclosure sale, within a certain period of time. The redemption period varies among the states.

Request for Notice

A recorded document requiring a trustee to send a copy of a Notice of Default or Notice of Sale concerning a specific deed of trust in foreclosure to the person who filed the document.

Title

A deed showing ownership to real estate.

Trustee Sale or Sheriff Sale

An auction of real property conducted by a trustee. Also referred to as a Sheriff’s Sale.

Call our offices at 1-888-222-5615 for immediate assistance or email.

Reviews by Google Users

  • review rating 5  My experience with Debt Advisors was truly a blessing in disguise. My wife and I were truly elated to be a part of a first time home buyer program with a well known state agency. This however turned out to be a nightmare We were one of the many who, during the Bush years ended up getting locked into a merciless ,ever increasing mortgage that was supposed to have a fixed rate. After countless attempts to try for modification or refinancing we soon found out the state agency didn't allow for such recourse. We felt the weight of the world was on our shoulders. That was when we decided to try Debt Advisors. Their attorneys were very knowledgeable and assuring. They were a great help in lifting what was a grievous burden. I would recommend their services to anyone.

    thumb anthony mosley
  • review rating 5  I filed a chapter 7 bankruptcy at Debt Advisors with Attorney Janice Nabke and the entire experience was nowhere near as stressful as I was worried about thanks to Janice who was very caring and dedicated to doing everything she could to make the whole process as simple as possible. Janice is very experienced with Bankruptcy cases and knew every correct step to take and was very detailed in explaining everything that I needed to prepare for and what to expect from beginning to end but what really stood out to me was how nice she was with a great personality so I would like to thank her for all of the hard work she put fourth and would highly recommend her to anybody seeking bankruptcy assistance. I would like to make special mention to Holly Mclure Larson who helped me out more than I could possibly imagine and went far above and beyond my highest hopes and expectations after I was still facing harassment and threats from a VERY aggressive Collection Agency trying to collect on the discharged debt and due to the very gracious help from Holly who is FANTASTIC I feel so much better and cannot thank her and the entire team at Debt Advisors enough.

    thumb alex avila
  • review rating 5  Debt Advisors is a wonderful company and I highly recommend them. Attorney Mike Georg has been so easy to work with and extremely helpful and kind throughout the process. Other amazingly helpful and caring staff I worked with were Holly, Julie and Jess. Thank you all!

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  • review rating 5  Awesome services, I went there feeling impending doom, and left with certainty that someone cares. Michael Georg was friendly and helpful informing me on what is best for my family.

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  • review rating 5  My experience with Debt Advisors was wonderful, Michael Georg and his staff are very respectful, helpful and knowledgeable about the steps that need to be taken in your case. My case was simple but challenging for me but they made sure that I didn’t panic and they were able to resolve my case in a very quick and timely manner. I appreciate the time and consideration that they took with my case. Would highly recommend

    thumb Bradley Harrison
  • review rating 5  Debt Advisors is a Top notch law firm!! I was an emotional mess. Lawyer Michael Georg was so compassionate & understanding. He reassured me everything was going to be okay. He explained everything step by step. The cost was very reasonable & he works with you! He's the Best!! The ladies in the office were very sweet, also! I couldn't have found a better place to take care of me. Totally put my mind at ease. HIGHLY RECOMMENDED!!!!! You won't be disappointed!

    thumb Lauri Z
  • review rating 5  Excellent customer service and staff. Got back to me in a timely manner regarding any questions I had. Made filing bankruptcy easy and pain free.

    thumb Amanda Marie Holterman
  • review rating 5  I had an awesome experience with the entire team at Debt Advisors(D.A.). They made a very stressful and complicated situation very easy. When going into this I thought this process was going to be very long and stressful as I did not know what to fully expect. From my very first meeting to my last I had nothing but an easy and pleasant process. Every one was so knowledgeable and helpful! I could not have asked for a better team to assist me in my time of need. Sending a very big Thank you to all the staff at D.A. you guys are amazing.

    thumb Cecilia Brito
  • review rating 5  Debt Advisors Law Offices rock! I went into bankruptcy not knowing what to expect but Mr. Pietrek who represented me put my mind at ease. Mr. Pietrek answered all of my question in-person and on the phone. I never felt uncomfortable or embarrassed. The amount of money I had to pay was like half the amount I would have had to pay going through ay other firm. If for some reason I had to go through bankruptcy again there would be no one else I would use. Good people good prices great services.

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  • review rating 5  I am so grateful for the Debit Advisors in assisting me to get my life back on track. I have great respect for them. Debit Advisors has integrity! I was in a very difficult situation and they guided me through. They were honest with me about what I could and could not do, what is allowable and not allowable, they got bill collectors off my back and they replied back to me in a timely manner when I had questions. As long as I did my part in the process, they more than did their part.

    thumb Kathy Carter

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