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Receiving a foreclosure notice is one of the scariest things that can happen to a homeowner. Defaulting on your mortgage isn’t something that happens overnight, but it often feels that way. Typically, debt begins to slowly accumulate and, before you know it, you’ve missed a few payments and those ominous warnings start appearing in the mail.
If you’re behind on your mortgage payments, or you are not paying other bills in order to stay current on your mortgage, the warning signs are clear. You need to take action before you get into deeper financial trouble.
One of the most effective ways to stop serious collection attempts and halt foreclosure proceedings is to file for bankruptcy. The Colorado bankruptcy code is complicated, especially in situations where an attempt is being made to stop foreclosure.
All of our Colorado Springs bankruptcy attorneys have extensive knowledge and experience in foreclosure and bankruptcy cases, so they can help you with your impending foreclosure. During your free case consultation, we can guide you on the options available to you in your particular case, and if it’s the right decision, we can continue helping you file Chapter 7 or Chapter 13 bankruptcy in El Paso County.
This is always one of the first questions potential clients ask us, and the answer depends entirely on your situation. Bankruptcy may directly cause you to lose your home if you file Chapter 7 and cannot protect your home from the liquidation process. This protection is called an exemption, and an experienced Colorado Springs bankruptcy attorney can help make sure your assets are safe from liquidation. If you file Chapter 13, on the other hand, you won’t need to worry about liquidation. You will have 3-5 years to catch up on delinquent payments (and continue making regular payments), and, if you succeed, the threat of foreclosure from your lender will be gone by the end of your case.
2. What is the best way to protect my home during bankruptcy?
The truth is, beyond continuing to make your mortgage payments if you are able, you don’t have to do much to protect your home during bankruptcy, the Federal Bankruptcy Code protects your home for you in most cases. Firstly through the automatic stay, which halts the foreclosure process for the duration of your bankruptcy case. Secondly, the state of Colorado offers a generous homestead exemption for petitioners filing bankruptcy in Colorado Springs, protecting up to $250,000 worth of equity in your home. And lastly, Chapter 13 bankruptcy allows you to catch up on your past-due mortgage payments with a repayment plan that will allow you to keep your home at the end of your bankruptcy case.
If you’ve filed for bankruptcy or been through foreclosure at some point and want to buy a home in the future, all hope is not lost. If you take the right steps, it can be possible to obtain a mortgage and buy a new home. The biggest hurdle will be the waiting period if you’re planning on financing a new home. Government-issued loans such as FHA or VA loans have a waiting period of 1-3 years, and conventional loans have a waiting period of 2-7 years. The amount of time that needs to pass before you qualify for a new mortgage depends upon several other factors as well, including the type of bankruptcy filed, and whether or not you have a prior foreclosure in your credit history.
Because of the automatic stay that goes into immediate effect as soon as your bankruptcy case has been filed, bankruptcy both prevents foreclosure and halts existing proceedings. But the automatic stay only lasts for the duration of your case, so your deficiencies must be resolved at the end of your bankruptcy if you want to keep your home after filing.
5. What is the best way to keep my home if I’m deep in debt in Colorado?
Unfortunately, there is no one size fits all answer to this question. It’s impossible to answer without a comprehensive assessment of your unique situation. Some homeowners will greatly benefit from bankruptcy, while others will benefit more from a different form of debt relief. The best way to determine which strategy is right for you is to retain counsel from an experienced Colorado Springs attorney.
Although Chapter 7 bankruptcy can temporarily stop foreclosure proceedings, its ability to ultimately save your home from foreclosure is limited. If you want to permanently stop foreclosure, you’ll need to get current on your payments by the end of your Chapter 7 bankruptcy. However, you can still temporarily halt foreclosure proceedings if you file for bankruptcy thanks to the automatic stay, and this can sometimes give you the time that you need to get the money to get caught up with your mortgage.
If you are able to keep your home, your personal liability on the mortgage will be erased when you receive your Chapter 7 discharge. However, it’s important to note that your mortgage lender will still have a lien on your home, which cannot be discharged. That means that your lender may still proceed with foreclosure if you fall behind on your mortgage payments. If you wish to keep your home, you must continue making your mortgage payments during and after your Chapter 7 bankruptcy.
If you can make your monthly payments as they are now, but have arrearages or back payments due, filing for Chapter 13 bankruptcy, also known as reorganization bankruptcy, may be the best option for you. This is because filing Chapter 13 bankruptcy allows you to include your past due mortgage payments in your bankruptcy plan to avoid foreclosure.
With Chapter 13 bankruptcy, all of your debts are combined into one manageable payment meant to help you pay down your outstanding debt over the course of several years.
Chapter 13 may be a good option for Coloradans who have a stable income, as you will be required to maintain the agreed-upon payments for between three to five years. However, it’s worth noting that if you lose your job or experience adverse financial circumstances that prevent you from staying current on your payments, you can ask the bankruptcy court to modify your plan and reduce the payment amount or convert your case to Chapter 7.
Few things can make you feel as uncertain about your future as the threat of having your home taken away. When you think about how proud you were when you first bought your home, all of the happy memories you’ve made there, and all of the work you have put into it over the years, you want to do everything you can to keep it. However, debt can creep up on anyone, at any time. If you’ve accrued deep debt in Colorado Springs it may seem as if there is nothing you can do to avoid foreclosure.
Our team of El Paso County bankruptcy attorneys has helped many people just like you — honest, hard-working people who have run into financial difficulty. We want to help you avoid foreclosure and get the financial relief you need to start moving forward in your life once again. Contact our firm today for a free case consultation. We know how to make bankruptcy work for you.