If you're renting your home or you’re a homeowner struggling to make payments, it may feel like you're hitting a brick wall and have no options. Can filing Chapter 13 stop eviction or foreclosure? In this article, you will learn more about how Chapter 13 bankruptcy can stop an eviction as well as stop the foreclosure process. Whether you're renting or a homeowner, you may find a safe haven in the bankruptcy laws that allow you to get caught up on your rent payments and mortgage payments.
If you have questions about Chapter 13 bankruptcy and how it may stop the eviction process and the foreclosure process and whether a Chapter 13 bankruptcy could be right for you, schedule a free consultation with the bankruptcy attorneys of Oklahoma Bankruptcy Law.
How an Automatic Stay Can Help Homeowners
When a Chapter 13 bankruptcy is filed, the bankruptcy court issues an automatic stay. An automatic stay stops the collection process. For homeowners involved in the foreclosure process, this can be quite beneficial.
Postponing a Sheriff's Sale
Filing a Chapter 13 bankruptcy postpones a sheriff's sale (also known as a foreclosure sale). A sheriff's sale, if you're not actively in the foreclosure process, is used by the mortgage company to sell your home to get back at least some of what is owed on your home after they take your home away from you. If you're looking to keep your home and avoid or postpone a sheriff's sale, filing a Chapter 13 bankruptcy case can help.
Understanding the Foreclosure Process
The foreclosure process is triggered when you are unable to continue to make payments on your home. The mortgage lender will issue a notice of default. Your mortgage lender may try to work with you on catching up with the payments or offer specific programs. How easy it is to apply for or receive help from their programs may depend on your lender. The same can be said for the county, state, or national programs. If the foreclosure process continues, a notice of sale is filed in the county where the property is located. Then, the property is scheduled for public auction, known as the sheriff's sale or a foreclosure sale. If the property isn't sold, the mortgage lender becomes the owner of the property.
Repayment Plans & Mortgage Payments
Filing Chapter 13 bankruptcy provides you with the unique opportunity of entering into a repayment plan for your debts. Not only does it stop the foreclosure process, but it also allows you to catch up on your past-due mortgage payments. The only caveat is to always pay the rest of your house payments on time.
What If You Have Multiple Mortgages or Your Home Value Dropped?
If you have multiple mortgages on your home or if your home has dropped in value, Chapter 13 bankruptcy can still be beneficial. If you carry more than one mortgage, Chapter 13 bankruptcy can make keeping your home more affordable through a process known as lien stripping. This same process is used if your home has gone down in value since you bought it because of a home equity loan.
Lien stripping is exactly what it sounds like. When an extra lien, such as a second or third mortgage or even a home equity loan, is added to your home, it can exceed the value of your home. The value of your home can be less than what you owe. Of course, it can also make it extremely difficult to afford to make your payments. A bankruptcy court, through the use of a Chapter 13 bankruptcy case, takes the second mortgage and turns it from secured debt that can be foreclosed upon to unsecured debt. The lender is ordered to remove their lien from your home. You may still make payments on the debt depending on your payment plan, but you may end up paying less than originally owed while also avoiding the foreclosure process!
How to Use Chapter 13 to Stop an Eviction
For renters struggling to make rent payments or who are unable to pay rent, Chapter 13 can stop the eviction process. Here's where an experienced bankruptcy attorney may be able to help keep you in your home or apartment if you decide to file for Chapter 13.
How an Automatic Stay Can Help Tenants
Once a Chapter 13 bankruptcy case is filed, the bankruptcy court issues an automatic stay. An automatic stay stops all collections-based activity including the eviction process. It is imperative that you receive legal advice regarding the timeline to pay rent in regards to filing a Chapter 13 to avoid potential issues with your case.
Understanding the Eviction Process
You should consult your lease agreement regarding the eviction process first to determine whether you are involved in an annual lease or whether you are a month-to-month tenant. If you are being evicted for non-payment of rent in Oklahoma, the first step in the eviction process is for the landlord or the property manager to issue a five-day notice to pay rent. It may also be titled as a Five-Day Notice to Quit. If the rent is not paid at that time, the landlord or property manager may then begin the formal eviction process by filing a Forcible Entry and Detainer action in the county where the property is located.
Eviction Judgment & Bankruptcy
If the landlord or property manager files a Forcible Entry and Detainer, the action is stopped once you file the Chapter 13 case. However, it is important to keep in mind that you must complete all the required steps of filing the Chapter 13 case. You will also pay back rent as part of your repayment plan. You will also be required to make all of your ongoing rent payments on time to avoid being evicted.
When to File for Chapter 13 Bankruptcy When Facing Eviction or Foreclosure
If you are facing eviction or foreclosure in Oklahoma, you should consider filing for Chapter 13 bankruptcy immediately if you are interested in stopping the foreclosure process or stopping the eviction process. To learn more about Chapter 13 and how it may be able to help you, schedule your free consultation with the team at Oklahoma Bankruptcy Law.