In a New Jersey chapter 7 bankruptcy case, the trustee may only sell the debtor’s property if the house has substantial equity in excess of the mortgage payoff. Therefore, if the debtor’s house has substantial equity, he would avoid this issue by not filing a chapter 7 bankruptcy case.
Upon the filing of a chapter 7, the mortgage company cannot commence or continue a foreclosure action against the debtor’s house. However, by court motion, the mortgage will likely be granted permission from the bankruptcy court to commence or proceed with a mortgage foreclosure action if the debtor is in default with the mortgage payments.
The mortgage company’s request to the court for permission to proceed with the foreclosure action is called a Motion for Relief from the Automatic Stay. Typically, the mortgage company would file such a motion about one to two months after the bankruptcy filing. The motion would be granted about 30 days after the filing of the motion.
The bankruptcy filing has absolutely nothing to do with the mortgage company’s right to commence or pursue a foreclosure action. The mortgage company may only commence or proceed with a foreclosure action if the mortgage is in default. A foreclosure action is a state court action, not a federal or bankruptcy type action.
In the event that the mortgage company is permitted to proceed with the foreclosure action, the action commences or continues at the point of the procedure where the action ceased at the time of the bankruptcy filing. After the mortgage company is granted permission to proceed, the bankruptcy case has no impact on the mortgage company’s foreclosure proceedings or the debtor’s your rights regarding the mortgage and possession of the house. This means that the debtor may continue to reside in the property until the completion of the foreclosure action. Additionally, the debtor has the right to work out a loan modification as well.
Please contact New Jersey Chapter 7 Bankruptcy Lawyer Robert Manchel at 1 (866) 503-5655 to discuss the effects of a bankruptcy filing on a mortgage foreclosure. Call to discuss your personal situation and the potential for bankruptcy protection.