If a homeowner is facing foreclosure, filing a Chapter 7 bankruptcy may be an effective means of stopping it. It’s important to note, however, that there are certain requirements to file a Chapter 7 case.
Important Chapter 7 Facts
Can Anyone File A Chapter 7 Case?
Not every homeowner qualifies to file a Chapter 7 bankruptcy. In order to file a Chapter 7 case, a homeowner must satisfy the median income and means tests. If a debtor’s household income exceeds the median income for a household of the same size in his state, he does not qualify to file a Chapter 7 bankruptcy case.
What is the Automatic Stay?
When a person files a Chapter 7 bankruptcy, the automatic stay immediately goes into effect. For a homeowner facing foreclosure, this is very important because the automatic stay prohibits his lender from moving forward with a foreclosure without first obtaining permission from the bankruptcy court. The automatic stay can buy a homeowner the time he needs to bring his mortgage payments current, sell the property, or negotiate a workout with the lender.
What is a Reaffirmation Agreement?
A homeowner who is behind on his mortgage payments has the option to reaffirm his mortgage. In some instances, the debtor will be required to bring his mortgage payments current in order to reaffirm the mortgage debt. Some debtors may be allowed to negotiate modified loan terms as part of the reaffirmation process. In any case, a homeowner who wishes to reaffirm a mortgage debt will be required to sign a reaffirmation agreement whereby he agrees to pay the mortgage pursuant to the original loan terms or modified terms as set forth in the agreement. If a homeowner chooses to reaffirm his mortgage, that debt will not be discharged. This means that the lender will be able to pursue collection efforts against the debtor and the property if at any time after discharge the debtor defaults on the mortgage. A debtor who reaffirms a debt may rescind the reaffirmation agreement at any time prior to discharge or within 60 days of the date the agreement was filed with the court, whichever occurs later.
Getting Legal Help
Defending a foreclosure is much more complicated than most people think. If you are a homeowner facing foreclosure, it’s imperative that you hire a qualified attorney to ensure that your petition and schedules are correct and that you are getting the full benefit of the protections afforded by the Bankruptcy Code.
