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Your home is probably the most valuable thing you own. We’re not just talking about the monetary value of the land or structure, we’re also referring to the intangible worth that the idea of a home has. Your home is where you raise your family, spend your free time, and usually where you feel the safest in the world. You improve your home, you take pride in your home, and you hope that it’ll be your safe haven for all of your life.
But if you’re behind on bills and your home is facing foreclosure, your safe haven can be taken away from you.
The question our experienced Fort Collins bankruptcy attorneys get asked all the time by potential clients is whether filing for bankruptcy will help a person who is behind on their mortgage payments avoid foreclosure.
As it is with so many legal matters, the answer to this depends on your specific circumstances, though this webpage does offer a brief overview of how bankruptcy may be able to help with foreclosure. The goal of our experienced Fort Collins bankruptcy attorneys is always to keep our clients in their homes through whatever option is possible.
To that end, we have created this page to provide you with information about Chapter 7 and 13 bankruptcy and to educate you about how bankruptcy can help avoid foreclosure. For a more specific answer to your bankruptcy and foreclosure-related questions, we encourage you to reach out to our helpful Larimer County area debt relief attorneys. We offer a no-cost case evaluation to potential clients in order to answer all of your bankruptcy-related questions.
When you file for bankruptcy in Colorado, an automatic stay is issued which forces your creditors, including your mortgage lenders, to immediately stop any collection actions. If your home is going to be foreclosed upon or is in an active foreclosure case, the automatic stay will legally stall the action from taking place.
For those of you in Fort Collins looking to file Chapter 7 or Chapter 13 bankruptcy for other debt-related issues in addition to foreclosure, the automatic stay also halts all creditor collection attempts for the duration of your bankruptcy case. What that means is that if you’re being harassed by debt collection agencies trying to collect on past due debt, the calls, e-mails, and letters must stop as soon as your file for bankruptcy.
In the spirit of full disclosure, our experienced Fort Collins bankruptcy lawyers feel that it must be said that the automatic stay does not stop foreclosure proceedings entirely, merely halts them. Your mortgage lender must either wait until after bankruptcy to restart the foreclosure process or seek to have the automatic stay lifted by the court, a process that can take months.
Chapter 7 bankruptcy, commonly referred to as “simple,” “straight,” or “liquidation” bankruptcy is the most commonly filed chapter of bankruptcy filed in Colorado. In general, if you spend most or all of your paycheck on your household expenses such as your mortgage, car payments, and groceries and there is little or nothing left over at the end of the month to pay your credit cards, hospital bills, and other debts, then you likely qualify for a Chapter 7 Bankruptcy.
During a Chapter 7 bankruptcy, a court-appointed bankruptcy trustee will liquidate all of your non-exempt assets and use the proceeds to pay off your priority debts. Any unsecured debt left over at the end of this process is then discharged/erased by the Federal Bankruptcy Court.
Colorado does offer generous asset exemptions for Chapter 7 debt relief seekers, including a homestead exemption that can protect up to $250,000 in home equity. Moreover, this number increases to $350,000 if the Larimer County bankruptcy petitioner is either elderly or disabled.
We want to point out that, thanks to the automatic stay, Chapter 7 bankruptcy does temporarily halt foreclosure proceedings, however, 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, which is a relatively short amount of time. Most Chapter 7 bankruptcy cases only last four to six months from start to finish.
If you cannot keep up with your mortgage payments once your Chapter 7 bankruptcy case has been discharged, 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.
Debt relief seekers in Fort Collins with a stable income who can make their monthly mortgage payments as they are now, but have arrearages or back payments due, might find Chapter 13 bankruptcy a better option to save their home from foreclosure. This is because filing Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows you to include your past due mortgage payments in your bankruptcy plan to avoid foreclosure.
With Chapter 13 bankruptcy, which you may see referred to as a “wage earners bankruptcy” or a “reorganization 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. Your knowledgeable Fort Collins Chapter 13 bankruptcy attorney will sit down with you and look at your financials and come up with a reasonable monthly payment that you will make to the bankruptcy court over the course of three to five years. Generally, we’ve found that so long as your income remains the same throughout your Chapter 13 bankruptcy case, you will have plenty of time to get current on your mortgage payments, thus avoiding foreclosure at the end of your bankruptcy case.
Finally, it’s worth pointing out that it may not be in the best interests of Fort Collins residents facing bankruptcy to keep a home they cannot afford to make payments on. Many unscrupulous debt relief attorneys out there will tell you that bankruptcy is a magic bullet that will solve all of your debt problems, including foreclosure.
The goal of our Fort Collins bankruptcy lawyers is to be as straightforward with you about bankruptcy as possible. To that end, we feel you should know that while filing for bankruptcy, in the right situation, can have many benefits, the legal process cannot miraculously resolve all of your debt issues. Speaking about your situation with an experienced and knowledgeable Larimer County Chapter 13 bankruptcy lawyer can allow you to examine your options and choose the most appropriate one for the good of your financial future.
The threat of losing your home to foreclosure is visceral. It can cause you a great deal of stress and anxiety, and rightfully so. Your home is so much more than mere walls, doors, and windows. It’s the place you’ve shared special times with family like Christmas morning or your child’s first steps. If the bank is threatening to take all of that away, it’s time to do something about it.
Dealing with mortgage lenders and other creditors, as well as the bankruptcy court, may seem like a daunting task. You want to make sure your bankruptcy filing is handled properly, and that your rights, your home, and your other assets are protected throughout the process.
Fortunately, you can get valuable advice and guidance from our experienced Fort Collins bankruptcy attorneys. If you’re worried about losing your home to foreclosure, don’t wait to get the help you need. Contact our firm today for a no-cost case evaluation. Our team of knowledgeable and helpful Larimer County area debt relief attorneys will work with you to find the debt relief solution that works for you.