A bankruptcy case has the advantage of providing a sense of certainty by immediately stopping a foreclosure process and any possible actions within the foreclosure litigation such as a foreclosure sale. A bankruptcy case has the advantage of not relying on the consent or agreement of the mortgage holder who under federal Bankruptcy Law is required to abide by the automatic stay which immediately goes into effect upon the filing of the bankruptcy case. There are several types of bankruptcy cases available to persons in foreclosure or threatened with foreclosure: Chapter 13, Chapter 11, and Chapter 7. Chapters 13 and 11 reorganize debt and revolve around a plan which allows a “catch up” over time on mortgage arrears and other debt, while Chapter 7 eliminates or “discharges” debt. More detailed descriptions of these types of bankruptcy cases and how they can help in a foreclosure situation follows below:
A Chapter 13 bankruptcy case is often used to stop the foreclosure process, including foreclosure sales, with the goal of curing mortgage arrears over a designated period of time. The Chapter 13 plan also cures debt other than mortgage arrears, such as credit card balances, often without interest and at a reduced rate. Under a Chapter 13 case, a monthly payment plan is developed, which allows the gradual curing of debt, including mortgage arrears, over time for up to five years. During this process, on a monthly basis, the debtor will go back to making post-petition mortgage payments, as well as making Chapter 13 plan payments to a court-appointed trustee. The combination of such payments will allow the debtor not to fall further behind in mortgage arrears, while at the same time curing the arrears that existed before the filing of the case. A budget, a Chapter 13 plan and bankruptcy schedules, as well as other significant documentation need to be submitted to the Chapter 13 trustee and Bankruptcy Court as part of the process needed to confirm the Chapter 13 plan.
The Law Office of Ronald D. Weiss, P. C. will represent you in the entire Chapter 13 case, in preparing and filing the many papers initiating the case, in representing you at the creditor’s meeting and confirmation hearing and in preparing the Chapter 13 plan for approval by the Court.
A Chapter 7 bankruptcy case will, like all bankruptcy cases, stop a foreclosure proceeding and/or a foreclosure sale with its automatic stay. Unlike the other type of “reorganization” cases, Chapter 7 does not have a plan, and simply provides for the “discharge” or the legal forgiveness of the debtor’s debt. Usually the debt sought to be discharged is non-mortgage unsecured debt such as credit card debt, personal loans and medical bills. In appropriate cases the elimination of such burdensome unsecured debt would allow the client to concentrate on curing their mortgage arrears. If a client decides to allow a foreclosure action to proceed against their main or secondary property, Chapter 7 will allow the discharge of any “deficiency” debt that may still remain, if the amount owed in secured debt on the property exceeds the property’s fair market value.
Reorganizations can be either within or outside the context of a bankruptcy case. Outside the context of a bankruptcy case a business or an individual may try to workout formal agreements with several of its creditors in what is considered to be a reorganization. Within the context of a bankruptcy case, a Chapter 11 reorganization case allows a business or an individual with significant debts and assets to protect itself from its creditors while it concentrates on reorganizing its affairs. A Chapter 11 reorganization case requires the debtor to offer a plan of reorganization, which extends, and in some instances, reduces many of the debtor’s obligations. A Chapter 11 reorganization is an involved and potentially lengthy bankruptcy case and requires special knowledge and expertise. The Law Office of Ronald D. Weiss, P.C. has represented many businesses and individuals in Chapter 11 reorganization cases.
A bankruptcy stay is automatic and goes into effect the instant a bankruptcy case is filed in sharp contrast with a stay in state court which requires time and effort to earn by convincing a state court (usually with an Order to Show Cause) that a stay is necessary. Because of its speed and ability to easily obtain bankruptcy is often a favored option in emergency situations such as foreclosure sales, evictions and bank restraints.
The Law Office of Ronald D. Weiss, P.C. regularly represents its clients before the United States Bankruptcy Court in Chapter 7, 13 and 11 bankruptcy cases, including in the filing and amending of numerous documents needed to proceed in bankruptcy. The Law Office of Ronald D. Weiss, P.C. represents bankruptcy clients in the Eastern District of New York (which has jurisdiction over Suffolk County, Nassau County, Queens County, Brooklyn, and Staten Island, NY) and in the Southern District of New York (which has jurisdiction over Manhattan, Bronx and Westchester County, NY). Chapter 7, 13 and 11 bankruptcy cases can effectively help a client deal with foreclosure issues, however, a bankruptcy case can be complex, and to effectively proceed in a bankruptcy case an individual should be represented by an experienced bankruptcy attorney. The Law Office of Ronald D. Weiss, P.C. can discuss and advise you about bankruptcy and how and whether it can help with your particular foreclosure situation.
The Law Office of Ronald D. Weiss, P.C. regularly represents its Long Island and New York clients in Chapter 7, 13 and 11 bankruptcy cases before the United States Bankruptcy Court and can review with you issues relevant to your foreclosure matter and how a bankruptcy case may be of help in the foreclosure.
Our consultations are free, the advice may be invaluable.
Please call us at (631) 271-3737, or e-mail us at [email protected] for a free consultation with an attorney, at our Melville, Long Island law office to discuss how bankruptcy can potentially be a foreclosure solution in greater detail.