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Home Foreclosure and BankruptcyI have dealt with this topic many times here, one more time I like to dwell this very important topic in somewhat greater details.
When You Are Facing Imminent Foreclosure?
A bankruptcy may stop imminent foreclosure regardless of the time if you file it before the fall of hammer (before the fat lady sings on the auction block), even if it is done few minutes and is intimated to the auctioneer. I have filed bankruptcy many times and then rushed to the auction place and stopped the foreclosure by showing the bankruptcy papers to the auctioneer. They were not very happy, but they had to comply with the federal laws. It is only done in emergency when the homeowner is either very lazy or hesitant to do any action or does not know his choices and the lender backed out from a loan modification promise at the 11th hour. It does not make difference if you had merely filed a skeletal i.e emergency bankruptcy regardless of the chapter you had chosen. Of course these measures are temporary. As you should know, the filing of bankruptcy petition an automatic stay is issued which is inherent in the petition of bankruptcy. In Chapter 7, you can prolong the stay if a mortgage negotiation is conducted during the mandatory period and before the creditor requests a motion to lift stay from your petition. However, when the discharge is granted, it is likely, that your creditor/lender would start the foreclosure proceedings again and try to evict you. It is different in case of Chapter 13 where debtor/homeowner might be able to cure the defaults on the mortgage under the plan and keep up ongoing payments. If so, the Chapter 13 debtor may be able to save the home from foreclosure.
One should understand that the bankruptcy can stop only the foreclosure for a short term. You need to handle the basic cause and cure the deficiency or negotiate the loan modification. If someone tells you that filing a bankruptcy is a permanent cure, then he/she is lying to you big time. Bankruptcy can buy some essential time for negotiation and cure of the loan. Again, the loan can be transferred from the underwriting department to the bankruptcy department of the bank and they now permission from your bankruptcy attorney to talk to you or some of your representative and that may be time consuming.
Reaffirmation of Mortgage
If you are willing to continue making the required monthly payments, you could still lose your home if you file for bankruptcy under Chapter 7. In other words, in Chapter 7 filing, if you have no equity in your home and you have not made your payments, the creditor can foreclose on your home during or after bankruptcy (after the motion to lift stay is taken away, or within 30 days, or when your bankruptcy is discharged.
Would Trustee Take Your Home?It depends on two basic factors. (1) How much equity you have? (2) how much of the home value is sheltered under the exemptions?
Please remember under Nevada laws, the exemptions of homestead is $550,000.
What is Homestead Exemption?The homestead exemption is the amount of your home’s value that the law puts out of the reach of your unsecured creditors. Mostly, in Nevada, Trustees are shying away from doing this extreme action because basically very few home owners have value which is non exempted and has otherwise equitable interests in their properties in this struggling economy.