Facing the loss of your home can be a frightening prospect. If your lender is threatening foreclosure or if you are worried that you cannot pay your mortgage, bankruptcy could provide a solution. A Long Island bankruptcy lawyer can help you to decide if bankruptcy is the right choice for you and can assist you with the process of filing bankruptcy to protect your house.

How Does Long Island Bankruptcy Help Save Your Home?

A home mortgage is a secured debt, which means you must pay it back or lose the house. Bankruptcy does not change this and doesn’t simply get rid of your mortgage debt while letting you keep your house.
However, when you file for bankruptcy protection, an automatic stay goes into effect. The automatic stay prevents a lender from continuing any kind of collections activities against you, unless the lender files a motion for relief from the automatic stay that the court grants.
Because the lender cannot generally move forward with the foreclosure process, the bankruptcy buys you time.  During this time, you may be able to negotiate mortgage modification with the lender. There are a number of mortgage modification programs, including programs that allow you to lower your monthly payment or refinance mortgages that are underwater.  Negotiating with your lender during bankruptcy can thus make it possible for your home payment to become affordable so you can keep your house.
Bankruptcy can also lower the payments on your other unsecured debts (like credit cards) or even get rid of these payments entirely. This frees up more money for you to pay your mortgage and hopefully makes the home more affordable.
Chapter 7 vs. Chapter 13
Consumers typically file for either Chapter 7 or Chapter 13 bankruptcy, both of which cause an automatic stay to go into effect. However, there are some important differences between Chapter 7 and Chapter 13.

• Chapter 7 and Your Home

When you file for Chapter 7 bankruptcy, you are required to have some of your assets sold. However, homestead exemptions protect a large portion of home equity, so this should not affect your rights to your house unless your home is worth significantly more than you owe on it.
Chapter 7 results in the discharge of eligible debts, which means you will no longer need to pay them back. You do need to reaffirm the mortgage debt, which means promise to pay and continue to pay after the bankruptcy filing. If you can get current and make payments, you can keep the house.

• Chapter 13 and Your Home

There is no asset sale required in Chapter 13, but you must enter into a repayment plan with your creditors and pay back a portion of your debts over three to five years. At the end of this period, eligible debts are discharged.