Chapter 13 Bankruptcy Stops Foreclosure in New York City
The moment a bankruptcy is filed in New York City any mortgage foreclosure action is stopped. To continue foreclosure the mortgage lender must file a motion with the court to lift the “automatic stay”, or wait until the case is over. While a Chapter 7 filing will delay foreclosure, a Chapter 13 is a more powerful solution for most people facing a home foreclosure. Depending on your goals, modifying your mortgage might be a good idea, but every bankruptcy case is unique. Your attorney may even advise starting with a Chapter 7 case and then converting to a Chapter 13 midstream as the best way to protect your financial interests in your home.
If you file for Chapter 7 you may be forced to surrender your home if you can’t come up with the back payments to your mortgage lender. If you choose to file a Chapter 13 bankruptcy you will not surrender any property, including your home, to the bankruptcy trustee. To keep your home out of foreclosure you must repay the mortgage arrears during your Chapter 13 case. You will have 3-5 years to catch up on past due mortgage payments during your Chapter 13 wage earners repayment plan. Having this time to catch up on payments can allow you to save your home instead of simply delaying foreclosure by a few months. If you are already in foreclosure when you file for Chapter 13 the automatic stay will immediately stop the foreclosure, and if you stay current on your mortgage payments going forward, and catch up on arrears in your repayment plan then your lender will not be able to foreclose.
Another powerful benefit of Chapter 13 Bankruptcy is that if you have junior mortgages no longer secured by the equity in your home, or a home equity line of credit you can “strip down” these loans in your Chapter 13 case. The stripped down loan will become part of your unsecured debt which is paid off at a huge discount or entirely eliminated in your repayment plan. First mortgages on investment properties can also often times be stripped down to the actual value of the property which has benefitted many of our clients with the downturn in the housing market.
There are many other things to consider when filing either Chapter 7, or Chapter 13 that you will need to discuss with your attorney. Because you have to be earning a regular income and be able to stick to a payment plan, Chapter 13 is not for everyone. You will be on a fixed budget for some time so it will take a lot of determination to get through a Chapter 13 plan. If you can stick to the plan you will likely be able to save your home. Even if your home can’t be saved by filing bankruptcy the process can still rid you of toxic mortgage debts or tax liabilities. It will also eliminate other debts like credit cards and medical bills which can help you immensely for the rebuilding period ahead. If you are expecting a foreclosure in New York or already in the process please contact the Law Offices of William Waldner online or at 212.244.2882 to arrange a free consultation. We offer affordable bankruptcy assistance for all New Yorkers and maintain a 99% Chapter 7 bankruptcy discharge record in New York City as of 8/31/16.
This article is intended for educational purposes only. By reading this article no attorney-client privilege has been created.