One of the scariest things that a Buffalo-area family face is the prospect of losing their home to foreclosure.
Sadly, many people in this part of New York do get behind on their house payments and may be facing a foreclosure action from their lender.
The result of a foreclosure case is not only the loss of one’s home but also a legal judgment that gives the lender the power to garnish wages or take other actions to pay off any remaining debt after the home gets sold.
Often, New York families fall behind in home payments because of a difficult family situation like a job loss, business failure or medical emergency.
While some lenders are willing to work with customers in hard circumstances, others are inflexible. All lenders have their limits though.
How can a bankruptcy protect my home from foreclosure?
Bankruptcy can protect a family home from foreclosure, but it is very important to understand how. Here are the high-level points:
In most cases, a family that files bankruptcy will get the benefit of an automatic stay. The automatic stay will stop the foreclosure process at least for a time, until the bankruptcy proceeding is over or until the lender gets permission to move forward with foreclosure.
Both a Chapter 7 and a Chapter 13 bankruptcy can free up money so that a family can negotiate with the lender and figure out a budget that would allow them to get out of default.
On a related point, a Chapter 7 bankruptcy can discharge the lender’s underlying home loan. Thus, even if the family has to turn the property over, they will not have to worry about the lender using garnishments or other collection tactics aside from taking the house back.
That said, a Chapter 7 will not protect a family’s home from foreclosure long term. The lender may elect to continue with foreclosure after the bankruptcy ends or earlier with permission from the court.
A family can use a Chapter 13 payment plan to make catch-up payments on their mortgage. If they can follow through on making these catch-up payments and their future payments, they may save their home from foreclosure.