Bankruptcy Questions Answered: How Do I Prevent Foreclosure With Bankruptcy?

Homeowners who are considering bankruptcy in Ohio and see it as the only way to address serious financial issues could be concerned about whether filing for chapter 7 or chapter 13 bankruptcy will forestall a lender from foreclosing on their home. And rightly so–financial stress is hard enough and the threat of losing a home could be too much to bear. At Hausen Law our bankruptcy attorneys understand, and we’re here to help explain what to know if you’re facing both foreclosure and bankruptcy.

Bankruptcy and the Automatic Stay

Once you have consulted with an Ohio bankruptcy lawyer and filed for chapter 7 or chapter 13 bankruptcy, a lock on debt collection goes into effect immediately. This provision is called the automatic stay, and it will prevent all lenders–even banks or other mortgage providers–from harassing a debtor or from forcefully foreclosing on a home or repossessing a vehicle. 

Our team of bankruptcy attorneys will quickly notify your mortgage lender that you have filed for bankruptcy. The sooner they are made aware of your filing, the sooner they will have to halt foreclosure proceedings. The automatic stay could last for anywhere from three to four months, in which time our Ohio bankruptcy lawyers will be working with you, the trustee, and the court to iron out a solid liquidation or repayment plan. After that point, it will be up to you to continue with regular mortgage payments going forward in order to prevent further foreclosure efforts.

One important reality to note is that a lender has the right to file a motion with the court to lift the automatic stay. If this is granted, then you may not be looking at several months’ time to work out the details of liquidation or repayment. Bankruptcy proceedings can naturally delay foreclosure, but if the lender wins their motion, they could be within their rights to foreclose. Working with an experienced bankruptcy attorney will ensure that the process goes smoothly, quickly, and efficiently and that you get the best outcome possible in your case.

Foreclosure and Chapter 7 vs Chapter 13 Bankruptcy

Filing for both chapter 7 and chapter 13 bankruptcy will put an immediate stop to foreclosure efforts. But that is where some of the similarities end. 

Chapter 7 Bankruptcy: 

When filing for chapter 7 bankruptcy, you will first need to qualify for the means test. This assessment of your finances will prove that you do not in fact have enough available assets to pay for both daily necessities and reduce debt, or even repay creditors and lenders. If you qualify, then unsecured debt (e.g. credit cards, personal loans) can be wiped clean through the bankruptcy process. Chapter 7 bankruptcy is referred to as “liquidation” because any non-exempt property can be sold to help repay creditors. Thankfully, when filing for bankruptcy in Ohio, most of your major property is exempt from sale for repayment. For example, your home, vehicle, retirement accounts and more are exempt. Married individuals can double these exceptions.

One thing to consider, however, is that the state of Ohio does set limits for some exempted property. As long as the equity in your home is less than the state-set exemption limit, you can rest assured–your home should be safe. If your home’s equity exceeds the state exemption limits, your lender could seek the difference. Exact figures of the applicable exemptions can change over time, so contact a trusted Ohio bankruptcy lawyer for the most up-to-date information.

All this said, if you really will not be able to make your mortgage payments moving forward, even when other debts are liquidated, then the foreclosure could very well happen again. It is worth discussing your financial situation with your bankruptcy attorney to ensure that your situation turns out in the best way possible.

Chapter 13 Bankruptcy

Filing for a chapter 13 bankruptcy could be the best solution for you if you are able to remain current on mortgage payments going forward, but don’t have the necessary funds to repay past-due bills while also shouldering day-to-day costs and other debts. As with any chapter 13 bankruptcy, your lawyer will work to create a repayment plan that satisfies lenders and creditors, while also staying within your means. Past-due mortgage payments can be wrapped into your repayment plan, which typically lasts from 3-5 years. During this time the automatic stay remains in effect. 

Note: During both forms of bankruptcy in Ohio, you must remain current on mortgage payments. This is absolutely vital if you wish to prevent foreclosure on your home.

Get Your Bankruptcy Questions Answered–Talk to an Ohio Bankruptcy Lawyer Today

If you’re facing foreclosure and see no way out financially, filing for bankruptcy in Ohio could be the solution. This provision was made to protect homeowners from having to give up their home, and the state of Ohio offers generous exemptions to make it possible. Both chapter 7 and chapter 13 bankruptcy are different, but it’s good to know that in Ohio, both can allow you to keep your home while also clearing away lingering debt. Get the chance to start over and keep your house in the meantime. 

Working with an experienced chapter 7 bankruptcy lawyer–like James Hausen and his team–is a great first step. Our Ohio bankruptcy lawyers are ready to help. Give us a call or fill out our online contact form and we will be in touch. Hausen Law is happy to serve all of Northeast Ohio, including the Akron, Canton, Cleveland, Wooster, Dover/New Philadelphia, and Youngstown communities. Contact us today to set up a free consultation.