How to Avoid a Foreclosure when Filing for Bankruptcy

Most people have a mortgage that lasts for 30 years. There’s a lot that can happen in 30 years. You can lose your job, you can become seriously ill or injured and rack up hundreds of thousands in medical debt, or you can struggle to make ends meet and get over your head in debt. You may find that you have fallen behind on your mortgage payment, and now you owe so much that you are at risk of the house falling into foreclosure.
Filing for bankruptcy in Arizona may be able to help you avoid foreclosure, depending on what your other finances look like. Here’s what you need to know:

Worried woman reading a foreclosure notice

Chapter 7 Bankruptcy

Chapter 7  bankruptcy is the “clean slate” bankruptcy that most people think of when they think of filing. However, it applies to unsecured debts, such as personal loans, medical bills, and credit card debts. It doesn’t apply to secured debts like mortgages or car loans.

You won’t be able to discharge your missed mortgage payments by filing Chapter 7 bankruptcy in Mesa. However, if you have decided that you don’t want to stay in the house, you can allow the bank to take the house and you can discharge what is left over.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is what’s known as a debt reorganization plan, and it’s the right choice if you want to keep your home. Rather than discharging debt, this chapter of bankruptcy puts your debt into a new payment plan – one that you can afford, based on your finances. The plan would include all the money that you owe your mortgage lender, and it would allow you to get current on your mortgage.

The Chapter 13 debt repayment plan lasts for three to five years, depending on what you owe and what you negotiate with the bankruptcy court. At the end of that time, you may not have paid off everything you owe. If that is the case, the court may discharge what remains.

Sometimes, you may carry more than one mortgage or line of credit related to your home. For example, you may have taken out a home equity loan to try to manage your debts on your own. If that is the case, you may have more debt tied up in your home than what your home is now worth. You may then be able to petition the court to strip these loans from your home, thereby making them unsecured debt. The value of the home doesn’t match the value of the debt, so the debt isn’t exactly secured. If the court agrees to your request, you may be able to discharge that debt entirely. You won’t be able to discharge your mortgage, but you may be able to discharge a second mortgage, home equity loan, or similar line of credit.

Talk to a Bankruptcy Attorney

Every bankruptcy filing is different because every person’s situation is unique. The best way to know what kind of bankruptcy will work for you – or even if bankruptcy will work for your goals – is to talk with an experienced Mesa bankruptcy attorney. An attorney will closely study your finances and determine the best path of action based on all the nuances and complexities of your case. For example, your home may have already moved into foreclosure, or you may be considering a short sale. Your bankruptcy attorney in Mesa can help you understand how bankruptcy can affect those and other situations.

The most important things for you to remember is that you should never resign yourself to inaction. Though your circumstances may feel hopeless at times, they are not. There is a path forward that can help you get your finances under control and get you out from the weight of overwhelming debt.

Call My AZ Lawyers today to learn more about how bankruptcy may help you. Our bankruptcy attorneys have been representing individual and business clients for many years, and they can handle even the most complex cases. We are committed to helping you find the best resolution as quickly as possible, and our attorneys are here to offer compassionate guidance at every step of the way. Call us today to schedule a consultation with a bankruptcy attorney and learn more.

Arizona Offices:

Mesa Location:
1731 West Baseline Rd., Suite #100
Mesa, AZ 85202

Office: (480) 448-9800

Glendale Location:
20325 N 51st Avenue Suite #134, Building 5
Glendale, AZ 85308

Office: (602) 509-0955

Tucson Location:
2 East Congress St., Suite #900-6A
Tucson, AZ 85701

Office: (520) 441-1450

Avondale Location:
12725 W. Indian School Rd., Ste E, #101
Avondale, AZ 85392

Office: (623) 469-6603

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