Using Chapter 13 Bankruptcy To Get Current On A Mortgage

The Maryland Bankruptcy Center

The Bankruptcy Code gives homeowners facing foreclosure the right to cure the default any time up until the foreclosure sale process is completed. The key word here is “process,” and state law determines what the process is for a valid auction or sheriff sale. Until this has been completed, homeowners who file bankruptcy can use the federal laws for another chance to save their home and cure the default.

The Bankruptcy Code itself does not even determine when a house is considered “sold” for the purposes of a valid foreclosure sale. This means that state foreclosure laws will most likely be used in cases where borrowers attempt to pay off a loan through bankruptcy, even after a sheriff sale. Another aspect that works in favor of homeowners is that many states require an auction to be confirmed before it is valid.

This means that homeowners who file bankruptcy have rights during the foreclosure process that are safeguarded at least through the sale of the property. These rights may be guaranteed for even longer than that, depending on how the confirmation process of the auction works after the home has been sold by the courts. If there had been a bankruptcy, the lender may not just be able to sell the house and take it over right away.

Redemption rights may extend the rights of the borrowers even longer. In states that have a redemption period, the borrowers are given a set period of time in which to cure the default even after the home has been auctioned at a trustee sale. But for those homeowners in states where a redemption period is not available, filing for bankruptcy may create a pseudo-redemption period through the right to cure.

However, rulings by state courts on this issue may determine how long this extra right to cure lasts. Some courts have ruled that the foreclosure sale process is completed once the gavel falls at the auction. In these cases, filing bankruptcy will not extend the time to cure the default for any significant period of time. Once the auction has been conducted, the sale process is complete, and the right to cure has expired

Other courts, however, have ruled that the sale process is not completed until the appropriate company or government agent has executed a transfer deed after the sale, the purchase price of the auction has been paid in full, and the sale has been confirmed by the court. In these states, homeowners may be able to file bankruptcy and have the property listed as a part of the bankruptcy estate and turned over to the trustee.

If this happens, the lender and local government will not be able to move forward with any other collection activities or actions to transfer the property. The automatic stay is in effect, the homeowners have an interest in the house, and the property is now a part of the bankruptcy proceedings. If the sale is confirmed or the deed transferred after the filing, it may be reversed at a later date as a violation of the stay.

Filing bankruptcy in this situation may result in homeowners having several additional months to cure the default. While the automatic stay is in effect, the lender, new owner, or local government can perform no action to confirm the sale or remove the borrowers from the house. Even if a Chapter 13 is filed, the owners will be able to cure the default through a repayment plan — even though their home was sold at auction.

There are a whole list of problems with filing bankruptcy to stop foreclosure, but for homeowners whose financial situations have recovered and who can cure their default, it may be a decent solution. Even after a sheriff sale, borrowers may be able to submit a plan that allows them to save the home. Sometimes, just filing bankruptcy is enough to set aside a sale and give the owners more time and one more chance.

Debt Trouble Warning Signs

The Maryland Bankruptcy Center

Think about this:

Just because you can pay your minimum payments each month, does not mean you are financially fit. Low monthly minimum payments benefit the credit card company, the "minimum amount due" is cleverly calculated to keep you trapped in debt for your entire adult life.

Do you really want to spend the best years of your life in debt? Here are some of the warning signs that you have a problem. If you answer "Yes" to any of these questions you are probably already in financial trouble. Whether you realize it or not, you need to find out your options.

• Do you need your next paycheck to survive?
• Are you borrowing from "Peter" to pay "Paul"?
• Are you spending more than 20 percent of your net income on credit card bills?
• Are you dipping into your savings or retirement accounts just to pay your monthly bills?
• Are you using credit cards to pay for necessities like groceries because you don't have the cash?
• Do you have more than two or three major credit cards?
• Do you depend on family and friends to bail you out?
• Are you financing a car for six or more years, or leasing, so that you will have a lower monthly payment?
• When you buy a car, are you more concerned with the amount of monthly payment than the cost of the car?
• Do you need a co-signer in order to get a loan?
• Are you hiding purchases from your spouse or family?
• Do you lie to your spouse or other family members about your spending or hide credit card statements?
• Are you overdue on any of your bills?
• Are you having to resort to "pay day" lenders to make ends meet?
• Are you pawning your belongings to come up with cash?
• Are you starting to look at making just "minimum payments" as being normal?
• Do you count on the "float" time between when you give someone a check and when it is cashed; to give you time to make sure the money is in the bank?
• Are you unsure at this point exactly, what you actually owe on all your debts?
• Have you tried to purchase something only to have your credit card declined?
• Do you bounce checks?
• Are you getting collection calls from the creditors?
• Have you been denied additional credit?
• Are you getting charged a high interest rate when you borrow money?

Here's a telling question: Knowing what you know about your own situation, would you lend yourself more money?
Rather than continuing to tread water with ankle weights, recognize you may be in over your head.

It is time to find out what your options are.
For your FREE consultation contact the Maryland Bankruptcy Center today at (410) 766-4044, (301)-587-8900, (877)-549-0888 or use our contact form.



The Maryland Bankruptcy Center

Why Should I Hire a Lawyer

The Maryland Bankruptcy Center

Only lawyers are allowed to give you legal advice and lawyers are bound by ethical rules to act in your best interest. A lawyer can tell you options that best meet your goals and protect your interests, and we don’t put your creditors’ needs ahead of yours.

You don’t want just any lawyer. You want a lawyer who knows what they are doing and who has lots of experience in bankruptcy law. You want a lawyer who is going to take the time to meet with you and to explain how the law works. And you need a lawyer who is licensed in Maryland and regularly practices law in your local area.

You are not required to have a lawyer to file bankruptcy, but if you don’t know the law you can find yourself facing unintended results, including losing some of your assets or being dismissed from your case.
Despite what some do-it-yourself web sites say, the law is complicated and it requires you to fill out hard to understand legal documents, and take exact steps. Each person is different, and each case is different. There is no “one size fits all” way to fill out the forms. If you don’t do it correctly you may find that you have created a problem that might not be able to be fixed, and that Internet preparation service won’t be there to help either.

These problems could just be that corrected documents have to be filed, but they may be, among other things, loosing property and money, being denied access to bankruptcy by having a case dismissed, or being pulled into a drawn out legal process. Once problems arise, a lawyer will often have to charge more to try to fix it (and not always able to fix it) then to have done it right to begin with.

The lawyers at the Maryland Bankruptcy Center are experienced and will handle your case properly.

Serving Clients in: Baltimore, Columbia, Glen Burnie, Towson, Annapolis, Pasadena, Rockville, Silver Spring, Laurel, College Park, Frederick, Ellicott City, Upper Marlboro, Landover, Lanham, Severn, Severna Park, Dundalk, Essex, Timonium, Catonsville, Brooklyn Park, Owings Mills, Reisterstown, Westminster, Eldersburg, Sykesville, Burtonsville, Odenton, Hanover, Prince George’s County, Howard County, Baltimore County, Montgomery County, Anne Arundel County, and Frederick County.
For your FREE consultation contact the Maryland Bankruptcy Center today at (410) 766-4044, 410-587-8900, or 877-549-0888.