In the majority of cases, filing for bankruptcy puts Minnesota residents and businesses back on their feet by erasing or significantly lessening much of their financial burden. In terms of mortgage debts and foreclosure, filing for bankruptcy will almost always alter the conditions of your mortgage debts to some degree. At Behm Law Group, Ltd., our attorneys are dedicated to assisting you in all aspects of bankruptcy in Mankato, MN, including fighting foreclosure and liquidating or apportioning your mortgage debt.
The two common types of bankruptcy, Chapter 7 and Chapter 13, are designed to handle cases of mortgage debt. In both cases, an automatic stay will be in place preventing creditors from collecting debts or harassing you during the filing process. An automatic stay is in place for a limited time period, however, and completing the bankruptcy process is vital to stopping foreclosure and alleviating your mortgage debts. Each type of bankruptcy filing treats the issue of foreclosure in different ways.
Chapter 7, or Liquidation Bankruptcy, is a process that will discharge all debts that qualify. This means your mortgage and all other debts that are not considered non-dischargeable under 11 U.S.C. §523 from the process will be eliminated. If you are behind on your home mortgage payments and you want to keep your home, filing for a Chapter 7 bankruptcy is probably not your best choice because there is no mechanism allowing you to “cure” or pay back your mortgage delinquency over a period of time. A chapter 7 bankruptcy proceeding will delay a foreclosure by only about 90 to 120 days while the automatic stay injunctive provisions of 11 U.S.C. §362 are in effect. While the automatic stay will prevent or stop a foreclosure, the relief is only temporary. Generally speaking, after the chapter 7 case is concluded in 90 to 120 days the automatic stay terminates and a creditor can restart or initiate foreclosure proceedings at that time.
A Chapter 13 simple bankruptcy is labeled “reorganization bankruptcy” but it really is more aptly referred to as “partial re-payment bankruptcy”. In a chapter 13, you draft a chapter 13 plan of reorganization in which you specify a particular payment that fits your income and expenses which you pay for a set period of time – usually 36 to 60 months. In a chapter 13 bankruptcy, you can “cure” or pay back your mortgage delinquency over the 36 to 60 months. After your case is filed, you must still make the regular monthly mortgage payments going forward but the delinquency itself would be paid out of the payments you make through the chapter 13 plan. For instance, assume your regular mortgage payment is $1,000.00 a month and that you are $10,000.00 delinquent. Further assume that your monthly chapter 13 plan payment is $500.00. After you file for bankruptcy relief, you would still need to pay your $1,000.00 regular mortgage payment. However, the $10,000.00 delinquency would be spread over the 36 to 60 month time of your chapter 13 plan. If your plan was a 36 month plan, roughly $277.77 of the aforementioned $500.00 chapter 13 plan payment would go towards the payoff of the $10,000.00 pre-bankruptcy mortgage delinquency ($10,000.00 / 36 months = $277.77). If your chapter 13 plan was a 60 month plan, roughly $166.66 of the aforementioned $500.00 chapter 13 plan payment would go towards the payoff of the $10,000.00 pre-bankruptcy mortgage delinquency ($10,000.00 / 60 months = $166.66). You must be able to meet this repayment plan to keep your home and stop the foreclosure process. When the plan is completed, your mortgage debt will be fully cured.
There are many legitimate reasons why Minnesota residents fall into debt and find foreclosure looming over them. Call Behm Law Group, Ltd. at (507) 387-7200 today and find out how we can help you stop foreclosure with bankruptcy in Mankato, MN.