I often have clients who have become behind on mortgage payments because of unforeseen circumstances. If there is a foreclosure action against you, the filing of a bankruptcy will automatically stop the foreclosure action. If we file a Chapter 7 Bankruptcy, the stop of the foreclosure action will be temporary and you will need to make arrangements outside of the bankruptcy to handle the foreclosure action. If we file a Chapter 13 Bankruptcy, there are a few options. You can apply for a loan modification while you are in the Chapter 13 Bankruptcy. During the time you are applying for the loan modification, the foreclosure action will be stopped. Whether the loan modification is granted will be up to your mortgage company. Applying for the loan modification while in the bankruptcy forces the mortgage company to work with your attorney. The documents are provided through a portal and there is a mediator to help facilitate the process. It is a timely process, which is often beneficial in order to continue to delay a foreclosure action.
Another option in a Chapter 13 Bankruptcy is to gradually become current on your past due payments through the Chapter 13 repayment plan. This often results in a high payment as there is no discount on the amount owed. However, the bank is required to accept this, and the foreclosure action will be stopped.