NJ. Lawyer Explains How A Property Is Lost When Surrendered And A Bankruptcy Case Is Filed.
This blog pertains to individuals who are either unable to save their house, or do not wish to save their house from foreclosure. Sometimes people understand that their house cannot be saved through any option, including bankruptcy. A person may understand that saving a house is too costly, not worth the monthly payment, or would prefer renting at this time.
There are various reasons for not saving a house from foreclosure. A person may be unable to save their house, due to a loan modification denial or a substantial reduction in income. Also, a chapter 13 debtor may change their intention, at any time, and decide to surrender their house, during a chapter 13 plan.
Although a chapter 7 will not allow a person to save a house that is in foreclosure, the bankruptcy filing will initially stop the foreclosure action for a short time period. It is unlikely that a bankruptcy trustee will sell a house, in connection with a chapter 7 case. If the house does not have substantial equity, the house will not be sold in the bankruptcy case.
If a chapter 7 debtor is behind with payments, the mortgage company may ask the bankruptcy court for permission to proceed with the foreclosure action. Or, in the alternative, the mortgage company will be permitted to proceed with the foreclosure action after the case is completed and the debt is discharged. Ultimately, the house will be sold at sheriff’s sale and at some time thereafter, the house must be vacated.
If a chapter 13 debtor, at any time, wishes to surrender the house, the mortgage company will be permitted to proceed with the foreclosure action, during the pending bankruptcy case. The chapter 13 bankruptcy case may continue even though the mortgage company proceeds with the foreclosure action and sheriff’s sale. As explained above, typically, the house is lost by way of sheriff’s sale, through the foreclosure process, even though the owner has filed for a chapter 13 or chapter 7 case.
Robert Manchel, the NJ. bankruptcy attorney, may be reached at 866 503 5644.