Milwaukee Bankruptcy Lawyer Can Advise on Foreclosure and Bankruptcy

« « An Irving Bankruptcy Lawyer Will Help You Recover Quickly | Negotiate Your Debts With Your Creditors » »

Friday, August 28th, 2009 Subscribe To Our Feed

Foreclosure has become a common word in our vernacular in the last year or so. As foreclosure rates on homes have soared, so have bankruptcies filed to try and save those homes. The loss of a home is a tragedy as, more than most debt, it has far reaching consequences. An entire family is uprooted and the dream of home ownership fades away. However, the bankruptcy process has provisions within it to “exempt” a home from the bankruptcy process and preserve the ownership even after other debt has been discharged. The debtor must, nonetheless, be able to prove that he or she will be able to make the remaining mortgage payments in a timely manner. A Milwaukee bankruptcy lawyer can provide you with further information.

Bankruptcy can prove to be a powerful tool to prevent foreclosure and give you time to reorder your debt and priorities. Having a Milwaukee WI bankruptcy attorney file a bankruptcy petition results in the court issuing an “automatic stay”. This action “stays” or stops many actions, such as debt collectors’ harassing calls, evictions and foreclosures, but only under certain conditions:

• The lender can obtain a motion to lift the stay – If your lender can convince the court that you are unable to retain your home – you are in arrears, you have no equity in your home and, even after the bankruptcy, your finances do not appear to allow to make the payments – then
the court will likely grant the motion to lift the stay and the foreclosure will proceed.

• The foreclosure notice has not already been filed – Many states have laws that require lenders to give homeowners advance notification of a foreclosure, sometimes as long as three or four months. If, during that three or four months, you file for bankruptcy and the notice runs out before the bankruptcy is complete, the court will lift the stay and the foreclosure will proceed.

Chapter 13 and Foreclosure
Chapter 13 may be the best way for you to catch up on your mortgage. Also identified as the “Wage Earner Plan”, Chapter 13 will allow you to stay in your house and pay off your arrearages over a length of time far longer than you probably could have negotiated by yourself.

A Chapter 13 bankruptcy petition will also absolve you of any second or third mortgage you might have on your home. Your first mortgage is secured by the entire value of your home. If the value of your house has dropped significantly, then there will be no value left over to secure the second or third mortgage. As a result, the bankruptcy court will classify the other mortgages as “unsecured debt”. And, unsecured debt is last in line to be paid off in a Chapter 13 filing and may be discharged, leaving you owing zero on them.

Once, borrowers were responsible for any tax losses incurred by the lender as a result of foreclosure. However, thanks to a new law that took effect in 2007, you are no longer responsible for those losses. However, you will not be protected from those taxes if the additional mortgages were not used for improvements to the securing property or if these loans were secured by other property, such as a second home.

Chapter 7 and Foreclosure
While offering more debt relief in general, Chapter 7 may not save your home. Often known as “liquidation”, the trustee for your Chapter 7 case might order you to sell your home to pay off your debts. Only if you have no equity in your home would a Chapter 7 work to your advantage.

Even if a Chapter 7 discharges the arrearages on your house and allows you to keep the home, you may still owe the amount of the arrearages to your lender. Why? Because, when you signed your original mortgage papers, you signed two documents - one was a promissory note that indebted you to pay the mortgage and the other was an agreement that could be recorded as a lien in the event you failed to make your payments. Therefore, by this time in your difficulty, your lender has probably already recorded this second document as a lien against you. And, even if the Chapter 7 discharges your debt, it has no effect on this lien against you so you will probably have to relinquish the house anyway as it was the collateral for the mortgage note.

A Milwaukee WI bankruptcy attorney can offer further information on both Chapter 13 and Chapter 7 bankruptcy and how they can affect you.

Get Social, Bookmark Us!!:These icons link to social bookmarking sites where readers can share and discover new web pages.