Will Bankruptcy Stop Foreclosure or Repossession?
Bankruptcy is often seen as a stigma. It makes a person seem irresponsible or bad with money. However, bankruptcy can do a lot of things to protect you. If you have a home or vehicle that you’re trying to protect, bankruptcy can help you.
If you are past due on your mortgage, filing for bankruptcy can help. Chapter 7 bankruptcy delays a foreclosure through an automatic stay. However, automatic stays stop once the Chapter 7 bankruptcy process ends. This means you will typically have four to six months of protection. While you may get some exemptions on your personal property, you may not be able to keep your home once the automatic stay ends.
If you want to permanently protect your home from foreclosure, a Chapter 13 bankruptcy filing can help eliminate foreclosure for good. It allows you to slowly get caught up on past-due payments over a period (several years). However, you must continue to make your regular monthly payments. Ideally, you should first pursue options to modify your payments. However, you do not want to wait too long because you will need to file for Chapter 13 bankruptcy before the foreclosure sale.
Chapter 13 bankruptcy works best where you fall behind in your mortgage payments because you can pay back your delinquent payments in installments over a period of three to five years. You must also make your regular monthly payments as they come due.
Chapter 13 can also help you avoid repossession of a vehicle. That’s because you may be able to do what is called a car loan, “cramdown.” Depending on when you purchased the car, this allows you to reduce your car loan to the actual value of the vehicle. This can be helpful since cars and trucks tend to depreciate quickly. If you bought a car for $20,000 several years ago, it may now be worth just $7,500, even though you may owe $15,000.
By using a cramdown, you can eliminate the $7,500 difference and reduce your loan amount to $7,500. You can also get your interest rate lowered in bankruptcy court using this tactic. However, there are rules that apply. For example, a car loan must be at least 910 days old to qualify, or roughly 2 ½ years. You would not be eligible for a cramdown if you bought your vehicle last year.
Contact Our Florida Bankruptcy Attorney Today
While bankruptcy can protect your home from foreclosure and your vehicle from repossession, the effects may be short-lived. You need to take swift action and be proactive along the way.
Work with Florida bankruptcy attorney Brian K. McMahon, P.A., to keep your possession. You don’t have to give up your car or home. See how we can help. Get started by scheduling a consultation today. Fill out the online form or call (561) 658-1789. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.