For families in Rockland County who are struggling with financial problems, one of the greatest fears is the loss of the family home through foreclosure. Filing a bankruptcy petition often seems like surrender, but, a bankruptcy petition under either Chapter 11 or Chapter 13 can be the surest means of stopping a foreclosure proceeding in its tracks.
Section 362(a) of the Bankruptcy Code provides that the filing of a bankruptcy petition automatically halts all collection proceedings against the debtor, including any proceeding to enforce the lien of a mortgage through a judicial sale. The provision applies to any debt that existed as of the date of the filing of the petition. If a loan secured by a mortgage is not paid in full as of the filing of the petition, the bank or other holder of the mortgage cannot take any action to collect on the loan or begin or pursue foreclosure proceeding.
Bankruptcy is not a permanent fix for a mortgage that is in arrears. Chapters 11 and 13 are intended to give debtors some breathing room so that they can attempt to reorder their finances. A debtor must prepare and present to the court a plan for paying all delinquent obligations, including the mortgage loan. Most plans generally allow three to five years for bringing the mortgage payments current. If the mortgage is still delinquent at the end of the forbearance period, a foreclosure proceeding can be started or continued to evict the owners and transfer ownership to the lender.
Anyone who is worried about losing the family house to foreclosure may wish to consult an experienced bankruptcy attorney for advice on the effects of the automatic stay and other aspects of bankruptcy. A bankruptcy proceeding can create time for the debtor to attempt to negotiate payment plans with various debtors, including the holder of the loan on the family residence.