Foreclosures  continue to be a major problem for many homeowners, and they can be devastating.  If you are unable to make your mortgage payments, you may fear losing your home and having the creditor come after you. You may also be concerned about the impact that a foreclosure could have on your credit score.  Fortunately, there are solutions that you could explore that could help you to save your house.
One option that debtors consider to save their homes is filing for bankruptcy protection.  While bankruptcy is not generally going to eliminate most types of mortgage debt, filing for bankruptcy can be helpful in many ways in allowing you to keep your house.
How Can Bankruptcy Help Save Your Home?
Because your house acts as collateral to guarantee your mortgage loan, you are not going to be able to keep your house if you cannot pay back the mortgage. However, there is a limited exception to this for those who file for Chapter 13 bankruptcy and have second mortgages.
If a second mortgage lender forecloses on a home, the holder of the first mortgage has first claim on the proceeds from the sale of the home. As a result, if there is not money left over from the sale after the first mortgage is paid, the second mortgage lender would receive nothing.  For example, if a home sells for $200,000 and has a $210,000 first mortgage and a $40,000 second mortgage, the foreclosure would generate only enough to repay a portion of the first mortgage and the second mortgage holder would receive no money after foreclosing.
A chapter 13 bankruptcy makes it possible for the second mortgage to be reclassified as unsecured debt. As a result, you can include payments to the second mortgage lender in a Chapter 13 repayment plan and may be able to have a portion of this debt discharged without losing your home.  If it  your second mortgage payments putting you at risk of losing your home, this is one important way that bankruptcy can save your house.
Bankruptcy and Mortgage Debt
Bankruptcy can also help you to save your home in other ways as well, even if it is not able to directly reduce the balance on your mortgage.
When you file for bankruptcy protection, an automatic stay will go into effect. As a result, your lender will not be able to continue foreclosure proceedings until the court grants relief from the stay or until the bankruptcy filing is complete. Filing bankruptcy can thus give you time to negotiate a mortgage modification or payment plan with the lender so you can keep your house.
Because you can discharge other debts or include them in a repayment plan, bankruptcy may also provide you with the room you need in your budget to be able to make your mortgage payments and keep your home.
To learn more or for help understanding how bankruptcy will impact your home, contact Ronald D. Weiss, P.C. today to speak with an experienced bankruptcy lawyer today.