How Can I Save My Home?
Step one is stopping the foreclosure. If a date and time has been set and the auction is coming up very soon, bankruptcy is about the only feasible way to stop the sale.
Injunctions are available in state court, but only after a well–researched lawsuit has been filed stating strong legal grounds to stop the foreclosure and – here’s the kicker – you need to convince the judge there is a likelihood of winning the suit.
No such showing is needed in bankruptcy. Outside of a court order, there is no sure–fire way to stop a foreclosure. Beware of scammers who claim they can stop your foreclosure without filing in court.
Once the foreclosure is stopped, step two is finding a way to make the house affordable. Bankruptcy stops the foreclosure, but unless the homeowner can find a way to pay the lender what he is legally entitled to, the lender will ask the court to “lift the stay” (remove the house from bankruptcy court protection) so that the lender can proceed again to foreclose.
Under Chapter 13, the homeowner has rights available to him to force the lender to take the regular monthly payment going forward, and cure the arrearage in an interest–free payment plan of up to five years. For example, a $15,000 arrearage could be paid in a sixty–month plan at approximately $250/month.
Furthermore, in many cases today, where house values have dropped significantly, the homeowner in Chapter 13 bankruptcy can “strip off” (eliminate) other mortgages on the property, as well as discharge credit cards and, depending on the use of the vehicle or how long ago it was purchased, reduce car payments by modifying the car loan. See the article on this website: “The Magic of Chapter 13.”
Lenders also are not barred from voluntarily offering loan modifications during the bankruptcy, either under the lender’s own programs, or the new federal "Making Home Affordable" program, which gives monetary incentives to lenders for modifying loans for homeowners.
Increasingly we are seeing lenders give debtors in Chapter 13 reductions in the first mortgage monthly payments under a loan modification program.