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WILL FILING BANKRUPTCY IN INDIANA STOP FORECLOSURE?

There are several ways to stop a foreclosure in Indiana.  A sure way to stop a foreclosure is to file either Chapter 13 bankruptcy or Chapter 7 bankruptcy.

FILING CHAPTER 13 BANKRUPTCY IN INDIANA

Many people choose to do whatever it takes to stay in their home for the indefinite future. A lot of times when our clients are worried about their home being foreclosed on, Chapter 13 bankruptcy is an option that can help.  Chapter 13 bankruptcy can immediately stop the foreclosure lawsuit.  It also has a mechanism that can re-establish regular payments for the mortgage while also paying the arrears (late unpaid payments) over the life of the plan.  To stop a foreclosure with Chapter 13, the debtor will need enough regular income to at least meet the current mortgage payment at the same time they are paying the arrearage.  If a debtor makes all their required payment to the end of the repayment plan, they will avoid foreclosure and keep their home.

Chapter 13 bankruptcy can also help to eliminate 2nd and 3rd mortgage payments.  This is because the entire value of a debtor’s home can be secured by their first mortgage (remember that it is possible for home values to drop).  There may not be any equity that secures the 2nd or 3rd mortgage.  In this case, Chapter 13 can “strip off” the 2nd or 3rd mortgage and recatorgorize them as unsecured debt.  In Chapter 13 bankruptcy, unsecured debt takes last priority and sometimes does not get paid back at all.

FILING CHAPTER 7 BANKRUPTCY IN INDIANA

There is another alternative that can temporarily stop foreclosure and that is by filing a Chapter 7 bankruptcy in Indiana.  Although Chapter 7 does not have a mechanism to re-establish payments or payback the arrears, Chapter 7 can delay the foreclosure process which would give the homeowner time to get a loan modification or work some other solution out with the mortgage company.  It is important to remember that a debtor needs to cure the mortgage before the bankruptcy case closes if they plan on keeping the home.

Some of our clients decide that they do not want to keep their home because the mortgage payment is too high or their life circumstances change.  In that case, if they file Chapter 7 bankruptcy they can surrender the home.  Although they have to move out of the home, the mortgage debt that they incurred because of the home can be forgiven in Chapter 7 bankruptcy.

Both Chapter 13 bankruptcy and Chapter 7 bankruptcy can be very powerful options when facing a home foreclosure.  It can be very beneficial in this situation to seek skilled legal assistance to present you with all the options and guide you through the bankruptcy process.  If you need help stopping a foreclosure, don’t hesitate to contact our office for a free consultation.

Watch this video below and it will answer the question:  Will filing bankruptcy in Indiana stop foreclosure?

 

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