Get to Know about Foreclosure after Bankruptcy

Get to Know about Foreclosure after Bankruptcy

If individual is planning for filing a bankruptcy case then they are well aware of the chapters in bankruptcy rules namely chapter 13 and chapter 7. However, it is important to understand which chapters will work the best.

If individual are worried about foreclosure after bankruptcy then they must file it under chapter 13 to get the maximum benefit. Let us take look at this article, to know foreclosure laws and how foreclosure after bankruptcy works.

Preventing foreclosure during bankruptcyNow if an individual has filed for bankruptcy then it temporarily stops for foreclosure in most cases. Now reader must be inquisitive to know why this happens. Then read this.

1. A legal protection act known as automatic stay effects soon as individual files for bankruptcy case. Automatic stay stops all collection actions, including creditor calls, repossession and foreclosure.

2. This protection typically stays intact after or rather during the period of bankruptcy case. That could be as little as four to six months for a chapter 7 case and one filed for chapter 13 will continue from three to five years.
Automatic stay last as long as filer thinks to stay or rather stick to the bankruptcy terms and agreement. In chapter 13, that means making regular monthly payments according to the repayment plan that is pre-set.

If the filer is not able to catch up on mortgage payments even with the help of bankruptcy, foreclosure might still be an option after the bankruptcy case ends.

Liens, Second Mortgages & Foreclosure after BankruptcyWhen filers have second mortgages or home equity lines of credit when they file for bankruptcy then things get a little tricky. However, individual should thank housing market that collapsed in 2007 so many Americans currently do have multiple mortgages or loans attached to their homes. Now let us learn how they can be treated at the court:

In chapter 13 filers are required to make payments to their primary mortgage lenders and to their bankruptcy trustee; here the trustee distributes these payments among the priority debtors. After the case gets concluded the home equity lines of credit gets eliminated. Lenders will get a percentage of trustee payments during the case.

Chapter 7 helps to cancel the debt on a home equity credit line, but it is not able to cancel the lien that creditor has on the house. This HELOC can still foreclose on a filer’s case after bankruptcy is over. Now if individual wants to avoid post chapter 7 foreclosure that helps to reaffirm payments to a HELOC lender during bankruptcy.

Second mortgages are no longer secured by their home value can be discharged in chapter 13 bankruptcy. Now the homes locate underwater may have second and third mortgages this are not secured any longer by house value. However, discharging a second mortgage will not effect what a bankruptcy filer owes on his or her first mortgage.

How could individual face foreclosure after bankruptcy?If an individual is thinking to file for a bankruptcy as a way to escape foreclosure then it is essential to speak with a bankruptcy lawyer to make sure that they understand how their mortgage will likely affect after the bankruptcy filing- whether or not the individual can face foreclosure after one get themselves discharged of their debts.

Author’s Bio: Alicia Johnson is a head on outreach expert at who has closely exhibited BPO processes and financial outsourcing. Fusion BPO is globally acclaimed for their frontline lead generation services and telemarketing solutions to their client companies.