If you are one of the millions of Americans facing foreclosure, you are not alone. Many homeowners are facing the grim reality of losing their home in a foreclosure sale. In most cases, it is not a lack of money management or poor financial planning that is causing Americans to lose their home through foreclosure. For many homeowners, the reason they are losing their home has nothing to do with overspending or a lack of financial skills but rather a decrease in income. The decrease in income could be from one or both spouses losing their job, the result of a serious medical condition, the loss of a spouse or some other type of financial crisis beyond their control. The fact is that many homeowners are suffering from a sense of guilt because they are facing foreclosure due to no fault of their own.
For example, Joe and Mary owned their home for 20 years and paid each monthly mortgage payment on time. However, Joe suffered a heart attack that resulted in surgery, a lengthy hospital stay and a long recovery period. His employer provided short-term disability; however, this did not cover all of their living expenses and bills. Once the disability payments ended, they were unable to pay their mortgage payments on just Mary’s salary. Even though Mary tried to find part-time work and Joe eventually found another job, they had fallen behind on their mortgage payments. Their lender refused to work with them even though they had paid their payments on time for 20 years and had substantial equity in their home. The lender filed a foreclosure action and the home was scheduled to be sold at a foreclosure sale. Joe and Mary thought there was no way to save their home because they did not have the ability to pay the past due mortgage payments all at one time. Two weeks before the foreclose sale, Mary scheduled an appointment with a bankruptcy attorney.
The bankruptcy attorney explained to Joe and Mary that they could file a Chapter 13 bankruptcy case to save their home from foreclosure. The bankruptcy would allow them to stretch out the mortgage arrearage (past due payments) over a 60-month period so that they could afford to catch up the mortgage payments and keep their home. The bankruptcy also provided relief from the credit card bills and medical bills that had been piling up during Joe’s illness, recovery and unemployment. They were able to save their home, preserve the equity they had accumulated during the past 20 years and begin to recover from this serious financial crisis. While your story may be different, the results can be the same. Filing a bankruptcy case can save your home from being sold at a foreclosure sale. In many cases, homeowners just need the assistance of the bankruptcy court to reorganize their debts into a more manageable plan. Filing a bankruptcy case allows debtors to do this while retaining their home for them and for their children.
Bankruptcy can also help even if you choose to surrender your home. In many cases, the mortgage lender will seek a deficiency judgment in addition to the foreclosure sale. If your home does not sell for a price that is sufficient to pay the mortgage company in full, it will ask the court to issue a judgment against you for the deficiency. The mortgage lender can then begin collection efforts on the judgment. In some cases, the mortgage company may be able to garnish your wages or seize personal property to pay off the judgment. However, filing a bankruptcy case will stop the lender from collecting a deficiency judgment. The debt will be discharged and you will not be held legally liable for the repayment of the debt. Therefore, even if you choose to surrender your home, filing a Chapter 7 bankruptcy will prevent the mortgage lender from seeking or collecting a deficiency judgment.
If you are facing a foreclosure and want to save your home, call our office for a free bankruptcy consultation. Attorney Gene F. Turnwald has over two decades of experience helping individuals just like you save their homes and protect their assets from creditors. It is a frightening and stressful time for you and for your family. Allow our office to assist you during this crisis by showing you how a bankruptcy case can help you.