The filing of a bankruptcy stops foreclosure. This is because bankruptcy has a legal protection called the automatic stay. The automatic stay is found in the Bankruptcy Code under 11 U.S.C. §362 and this provision halts foreclosure as a matter of federal law. Any foreclosure sale after your bankruptcy is filed would be void.
The Foreclosure Process in Colorado
Foreclosure is the legal process by which your property may be sold by the mortgage company or another lienholder.
Once the mortgage company pursues foreclosure, they must provide you with notice of the foreclosure. After you have received notice of the foreclosure you will be given the opportunity to catch-up on past due payments, attend a hearing, and protect your rights.
If the alternatives offered by the foreclosing mortgage company or through the Colorado foreclosure process do not help you, then bankruptcy may be an appropriate solution to stop your foreclosure.
It is important to understand that even if you are behind on your mortgage and in foreclosure your home is your property and not the mortgage company’s property. This is true until the property is actually sold at the foreclosure sale.
Differences in Chapter 7 v. Chapter 13 Bankruptcy and Foreclosure
The type of bankruptcy filed will determine whether the foreclosure will just be postponed or whether you will be using bankruptcy to payback arrearages and keep your home.
Chapter 7 bankruptcy will stop foreclosure on your home; however, since Chapter 7 bankruptcy does not have a plan of reorganization, then Chapter 7 is only a temporary solution to stopping foreclosure. Once the foreclosing mortgage company requests the automatic stay be lifted or the bankruptcy case is discharged, then the mortgage company may begin the foreclosure process where they left off.
However, this does not mean a Chapter 7 cannot help you keep your home. By eliminating expensive debts, such as credit cards or high monthly auto loan payments, then you may be able to afford to pay your mortgage.
After you file Chapter 7, you would want to begin discussing your options for modifying your mortgage with your lender in order to save your home.
In the alternative, if you file a Chapter 13 bankruptcy, then you do not need to have a separate agreement with the mortgage company to keep your home. The bankruptcy will stop your foreclosure, allow you to reorganize expensive debt, begin making regular payment after your case is filed, and permit you to catch-up on arrearages over 3-5 years.
In addition, in Chapter 13 bankruptcy you can remove 2nd or higher mortgages and liens placed on your home as long as the value of the home is equal to or less than the amount you owe on the first mortgage. Bankruptcy attorneys call this lien stripping. It can save you thousands of dollars and help you afford to keep your home.
Do Not Give Up on Saving Your Home Until You Have Met With Us to Learn More About Your Bankruptcy and Foreclosure Options
If you think bankruptcy may be an option to handle your foreclosure, then speaking to the bankruptcy attorneys at Cohen & Cohen as soon as possible will help to get you on track to filing bankruptcy and stopping foreclosure.
Call 303-933-4529 right now to schedule your initial consultation at our convenient central Denver location.