The Role of Bankruptcy in Foreclosure Defense

The Bankruptcy Code provides for various debtor-creditor solutions, including the elimination, reduction and reorganization of all non-dischargeable debts. It also allows for a 3-5-year plan to pay mortgages and other secured debts on terms that may be more favorable than the original debtor-creditor agreement.

Individuals can keep certain assets (usually IRAs) and personal vehicles in varying amounts. It also reverses statutory liens (such as real estate tax liens).

Stopping a Foreclosure Sale

A foreclosure sale can be stopped through bankruptcy, preventing all creditors from attempting to collect on debts and stop a foreclosure or repossession. It can also buy time to investigate options such as mortgage modification or a short sale.

Bankruptcy is governed by federal law under the constitutional grant of authority to Congress to establish uniform laws. Each state may have its laws on the subject as well.

In a Chapter 7 bankruptcy, an automatic stay (immediate injunction) stops all creditors from taking any action, including collecting debts or proceeding with a foreclosure or auction sale. During Chapter 7, certain debts are discharged, including most property taxes, second mortgages and home equity loans. Debts secured by collateral such as tax liens, child support, alimony and most student loans cannot be eliminated in bankruptcy.

Consider speaking with a bankruptcy Maryland lawyer for advice if you are in foreclosure. Bankruptcy is complex, and the law varies by state.

Stopping a Foreclosure Process

The foreclosure process can be emotionally and financially devastating. The good news is that homeowners have legal options to halt the proceedings, buy time and even seek restitution if certain rules and regulations were not followed during lending or foreclosure.

One of the most common foreclosure defense strategies is to file bankruptcy. This will halt all pending foreclosure actions, eviction proceedings and debt collection efforts. It will also allow homeowners to work with their lender, as they would with a regular creditor, to enter into an agreement that will let them keep the property.

Bankruptcy will require a thorough review of all assets and income, but it can often help make the property’s title chain clear for a lender and stop foreclosure. If a foreclosure defense attorney is involved, they can also point out other issues that may impact a lender’s decision to foreclose on a homeowner, including violations of NY law and improper procedures.

Defending a Foreclosure Sale

One of the most effective strategies for foreclosure defense involves attacking the bank’s practices. For example, if your mortgage lender misses paperwork, fails to adhere to state mortgage laws and the federal Truth in Lending Act guidelines or violates the Real Estate Settlement Procedures Act, these actions could give you grounds to challenge the foreclosure.

Other tactics include establishing that a loan, deed of trust or promissory note is invalid or that documents were forged, lost or misplaced. If you owe the IRS money, you might be eligible for an Offer in Compromise, which lets you pay less in monthly installments than you owe.

You can stop foreclosures by filing for bankruptcy. However, bankruptcy is not a solution for everyone. Some debts survive a bankruptcy filing, including student loan fines and financial restitution from a criminal conviction. A bankruptcy trustee will take over your property and turn it into money to pay your creditors.

Defending a Foreclosure Process

Filing for bankruptcy can be an effective measure to prevent property foreclosure. It can buy homeowners valuable time to negotiate with lenders, attempt a loan modification and even sell their property. A bankruptcy filing also halts the foreclosure proceedings by law.

Several legal defenses to foreclosure may be available, including a lack of clear chains of title for the mortgage and promissory note and an inability to prove that the amount owed is correct (sometimes lenders tack on extra fees to inflate the total debt artificially). An experienced Queens foreclosure defense attorney can assess your case and determine whether these defenses apply.

However, it is important to remember that foreclosures are not prevented by bankruptcy, and it is not always effective as a preventative measure. A lender can file a motion to lift the automatic stay and continue foreclosure. This is why seeking professional advice as soon as possible is crucial.

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