Are you behind on your mortgage payments?  Has your mortgage company threatened to take legal action to collect your past due mortgage payments? Have you been served with foreclosure papers by your mortgage lender?

If you answered “yes” to any of the above questions, you are one of the thousands of people in Texas facing the frightening prospect of losing their home. Unfortunately, unless you have the ability to catch up your mortgage payments with a lump sum payment, there are not many options available to stop a foreclosure. However, filing a bankruptcy case will stop the foreclosure action and may allow you to save your home.

Filing Chapter 13 Bankruptcy to Stop Foreclosure

The protection provided by a bankruptcy filing is automatic and immediate. When you file a Chapter 13 bankruptcy case, the automatic stay provisions of the Bankruptcy Code immediately go into effect preventing creditors from taking any further action to collect a debt.  Creditors are prohibited from beginning or continuing actions to repossess, foreclose, garnish, or seize any assets or income from the debtor.  If a foreclosure action has been filed, the lawsuit must cease.  If a foreclosure sale has been scheduled, the sale cannot take place as long as the bankruptcy case is filed prior to the sale beginning (even if the sale is scheduled later that same day).

A Chapter 13 bankruptcy case protects your home, your income, your family, and your future financial well-being by allowing you to reorganize your finances into a manageable monthly plan.  In order to keep your home, you will be required to pay the mortgage arrearage through your bankruptcy plan; however, that amount can be spread out over a 60-month term.  You will also be required to resume your regular monthly mortgage payments and keep those payments current during the Chapter 13 case.  You may be concerned how you will be able to resume your mortgage payments but bankruptcy plan is designed to reorganize your monthly debt obligations so that you can afford to keep your home.

When you complete your Chapter 13 bankruptcy plan, your mortgage arrearage is paid in full and most, if not all, of your unsecured debts are discharged.  You are on a much more secure, solid financial footing than you were when you entered the Chapter 13 bankruptcy.  Most debtors find that their financial well-being substantially improved during the Chapter 13 case and they came out of bankruptcy in a much stronger financial position.

Chapter 7 Bankruptcy and Foreclosure

The same automatic stay provisions that apply in a Chapter 13 case apply when you file a Chapter 7 case. If you have a pending foreclosure action, the filing of the Chapter 7 bankruptcy case stops the foreclosure immediately.  Unfortunately, a Chapter 7 bankruptcy is not a reorganization and it does not prevent your home from eventually being sold at a foreclosure sale unless you can catch up the mortgage payments before the foreclosure action resumes.  However, there are some advantages to filing a Chapter 7 case even though you may still lose your home.

The Chapter 7 case will delay the foreclosure sale giving you additional time to find a new place to live.  It will also discharge any deficiency that remains after your home is sold.  In other words, if your home sells for less than you owe on the mortgage, the mortgage company cannot obtain a judgment against you for the remaining balance.  You can also discharge most, if not all, of your unsecured debts for a fresh start to recover and rebuild your finances for your future and your family’s future.