When Is Emergency Bankruptcy Needed to Stop Foreclosure?

In financial difficulties, thousands of Americans could face foreclosure. If you get behind on payments on your home and you simply can’t keep up financially at the moment, it could be that you can use the bankruptcy system to stop foreclosure. An emergency bankruptcy filing can be hugely helpful. It might be that you can stop it from happening at all, but more likely you will at least be able to delay the foreclosure on your home so you can buy time to establish how you are going to solve the issues, restructure your lending and generally save your family home.

When is The Best Time to File For Bankruptcy?

If you are looking at an emergency bankruptcy filing to stop foreclosure, what is the best time to file? When is this required? How can you ensure that your emergency bankruptcy does what you intend it to?

 

As you get closer to foreclosure then bankruptcy becomes your best option for stopping the sale. This works because something called an “automatic stay” will be forced into effect when you file for emergency bankruptcy.

 

The effect this has is that it means banks cannot immediately foreclose on your home or collect the debt. Because of the fact that foreclosure activities need to be slowed or stopped while the bankruptcy process is carried out.

What Can the Bank Do About Bankruptcy Filing?

The next thing that will probably happen after you have filed for bankruptcy is that the bank files what is called a “motion for relief” from the automatic stay. Effectively, they’re asking the bankruptcy court if they can continue to try to track down and claim their money regardless of the fact you have filed for bankruptcy.

filing for bankruptcy

So, you might be wondering what the point is? Why would you file for bankruptcy if the bank is going to potentially be able to come after its debts anyway? Well, if the bankruptcy court does deem that the bank will be able to continue with the foreclosure process and close your case after order of discharge, you will have delayed the process by up to two months.

The Benefits of Delaying Foreclosure

If you have managed to delay the process, you might be wondering what you need to do next. Some people think that all they have achieved is delaying the inevitable, but this is not the case at all. An emergency bankruptcy filing can give you the chance to restructure your finances and your lending. You may be able to get yourself in a far better position financially, and as a result you could potentially avoid the foreclosure eventually. 

 

Instead of delaying the process, think of it as buying yourself some time. The procedure might take two months, so this is an extra 8 weeks or so you have to try and find other solutions, negotiate lending and work out how you might be able to keep your property. Or, even if you are resigned to the fact that the property will be foreclosed upon, it can give you time to work out other arrangements.

Types of Bankruptcy to Prevent Foreclosure

  • Chapter 13 – Chapter 13 bankruptcy might allow you to restructure the debts you have. Some debts are repaid in full whereas others might be repaid in part. This usually takes place over a three to five year payment plan. Because of the fact this might allow you to repay the mortgage you have (and that is threatening your foreclosure) you may well get to keep the house and remain living there throughout. You will pay a smaller amount of the debts back. If you don’t get to complete the process and aren’t granted this type of bankruptcy it is still good for stopping the foreclosure.
  • Chapter 7 Bankruptcy – A Chapter 7 bankruptcy might not be the best bet for saving your property unless you are able to get a modification on your loan. If your goal is to prevent foreclosure though, a Chapter 7 bankruptcy filing can do the job. You may be able to file bankruptcy Chapter 7 online. Another benefit is that you can potentially live in the home during this time without making payments. Compared to Chapter 13 bankruptcy, this type of bankruptcy can totally absolve your liability for any of the debt and though it isn’t a good idea if you want to keep the property, it does the same job of buying you time.

 

Can You File Bankruptcy Online to Stop Foreclosure?

Some aspects of the bankruptcy application allow you to file Chapter 7 online. Because of the fact that bankruptcy involves completing forms and filing them within a court, you can possibly do this online. Some courts allow you to submit all of the paperwork online but you need to check your local restrictions on whether or not this is the case. You will probably have to attend a 341 meeting in person. This is a meeting with the allocated official who is designated your case. This can’t be done online.

 

The court system is catching up! Gone are the days where everything had to be done in person and while you can’t do every aspect of an emergency bankruptcy filing online, a lot of the admin can be carried out from the comfort of your own home.

 

Unfortunately, we can’t answer every question on the process of filing for bankruptcy online due to the fact that each and every bankruptcy court has its own processes and its own restrictions. Local state law might even come into consideration here. So how can you find out the rest of the information you need? Contacting your local bankruptcy court is the way to receive all the guidance you require.

What File an Emergency Bankruptcy Filing Process Usually Looks Like

What is the process of filing for bankruptcy? Which steps do you need to take to get to the bankruptcy petition and stop foreclosure.

 

You will need to fill in Form 101 – Voluntary Petition for Individuals Filing for Bankruptcy. This is effectively the notification that you are filing for bankruptcy. Next comes Form 121 – Your Statement About Your Social Security Numbers. This is to do with identification and ensuring it is you.

 

You need to provide all of the names and addresses of those who might try to collect debts from you. Any creditors should be mentioned. You can find these via a creditor mailing matrix.

 

You also need a credit counseling certificate requirement and a filing fee, which you might be able to pay in installments (the court can see how paying straight away can be an issue for some people who are applying for bankruptcy!)

bankruptcy lawyer

Conclusion

It can feel a little dishonest applying for bankruptcy just to stop foreclosure, but it is a common practice and it is a very effective way to buy yourself the time needed. It could be that after you have stopped foreclosure via a bankruptcy declaration you find a way to restructure your debts and you can even keep your home, this is the ideal scenario for everyone involved including the creditors, so don’t worry too much about the fact that you are deliberately delaying proceedings.

 

Emergency bankruptcy feels like a huge step to take in your life, but a lot of people go through this and come out the other side. The declaration and application can be done at a tactical time to ensure that you are not faced immediately with foreclosure, and you can live in your house while you find out what you are going to do next.