In the event of a pending foreclosure, bankruptcy can be a practical tool. The bankruptcy can stay the impending foreclosure process, but the bankruptcy filing is not the end of the process for the debtor. The bankruptcy debtor will also be tasked with specific responsibilities.
Not all creditors are the same. Secured creditors, like mortgage companies, have a secured interest in the home, so unlike unsecured debt, mortgage arrears are not discharged in bankruptcy unless the debtor is willing to surrender the asset (real estate). It is important to remember: the bankruptcy court does not sue your mortgage company for unfair treatment, nor does the bankruptcy court review all the mortgage payments and determine the amount of the arrears. If there is a discrepancy with the amount of the arrears owed, the onus is on the debtor to prove the mortgage lender is incorrect. The debtor must provide documentation and evidence to prove the mortgage lender was incorrect in their calculation.
The bankruptcy allows the debtor time to pay the arrears in the bankruptcy or time to refinance or sell the real estate. Once the bankruptcy is filed, the mortgage company will file a claim listing the amount of the arrears.
Depending on the amount of the arrears and the debtor’s budget, the entire amount can be paid through the life of the plan. If the amount of the arrears, is beyond the debtor’s ability to pay throughout the plan, a better option may be for the debtor to sell the real estate or refinance the home. The debtor is also responsible for staying current on the monthly mortgage payment after filing. If the debtor does not stay current on the mortgage after filing, the mortgage lender will file a motion for relief, so they may continue collection efforts against the debtor.
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Bankruptcy can offer protection to a debtor facing foreclosure. But, bankruptcy does come with responsibilities for the debtor, and the debtor is ultimately responsible for the mortgage arrears. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back.
