NJ Bankruptcy Lawyer Can Stop Foreclosure and Save Your Real Estate
If you are in serious financial trouble, bankruptcy can stop foreclosure and save your real estate. The NJ bankruptcy lawyers at Garland & Mason, L.L.C. have helped numerous Monmouth County, New Jersey, residents save their homes from foreclosure even though they were behind in their mortgages or their mortgages were upside down. Below, we explain several important phrases for you to consider, including reaffirmation agreements, bankruptcy exemptions, short sale process, reorganization, mortgage stripping loan modifications and more.
Will Filing for Chapter 7 Bankruptcy Protection Save My Home?
The Chapter 7 bankruptcy process offers several advantages when it comes to saving your real estate. As soon as you file your bankruptcy petition, all collection efforts have to stop. This includes the phone calls, the lawsuits, the letters and any other efforts to collect the debt. Any efforts by creditors, including secured creditors, have to proceed through bankruptcy court. This protection is known as the Automatic Stay.
Reaffirmation Agreements and Exemptions – Chapter 7 bankruptcy exemptions allow debtors to save their home if the equity in the assets is less than the federal or state exemption. If your house is worth $100,000 and the mortgage is $110,000, then the shortfall is $10,000. Federal bankruptcy exemptions let you exempt more than $10,000. In this scenario, a debtor can discharge his unsecured debts (credit card bills, medical bills and more) and still save the house as long as the monthly mortgage bills are paid.
Therefore, in order to keep the house the debtor will have to enter into a reaffirmation agreement with the lender. In the example, if the mortgage was $190,000 the exemptions wouldn’t be enough to save the house because there would be a $90,000 shortfall.
Should I Consider Chapter 13 Bankruptcy?
Chapter 13 bankruptcy also has several advantages when it comes to saving your real estate. The Automatic Stay also applies to Chapter 13 petitions. As soon as you file your Chapter 13 bankruptcy petition, the harassment will stop.
Reorganization – If you are in arrears in your house mortgage payments, you can save your house by proposing the following:
- You will pay arrears over a five-year period.
- You will continue to make the regular monthly payments.
- If the bankruptcy court approves your reorganization plan, you will not have to pay interest on the arrears.
Mortgage Stripping – Since the value of real estate has decreased in New Jersey and for other reasons, many homes are worth less than the amount of the mortgages. Chapter 13 bankruptcy allows debtors the right to strip worthless mortgages. Stripping means the second and third mortgage holders and lien holders after the first mortgage will lose their rights as secured creditors. Instead, they will be treated as unsecured creditors. Unsecured creditors receive a percentage of the full claim. The percentage is paid over a 60 month period.
Are There Options to Consider Prior to Filing Bankruptcy?
Absolutely. In New Jersey, homeowners who want to save their real estate from foreclosure can consider loan modifications or short sales.
Loan Modifications – Debtors may be able to enter into a loan modification agreement before having to file a bankruptcy. Loan modifications usually allow the debtor to pay what they owe on their mortgage over years. This option also will lower your interest rate. There is an application process that could be lengthy and frustrating and your creditor has to agree to the modification.
You should consider speaking with an experienced New Jersey loan modification attorney who can help you through the HAMP process (Home Affordable Modification Program). HAMP is a federal program that provides incentives for the lender.
Short Sales – Before you file a bankruptcy, you may consider selling your house through a process called a short sale. You use a short sale when mortgage(s) and liens on your home have higher value than your house itself. A short sale allows you to sell your home (with the permission of the second and third mortgage holders) and even the first mortgage holder (to the extent the mortgage is worth more than the house). This way, you can give clear title to a buyer. You may still be liable for the deficiencies.
A good reason to consider a short sale is it may be easier to buy a new home and restore credit than a bankruptcy would. In some cases the mortgage holders may forgive the debt if they know there aren’t other assets.
Free Review with NJ Bankruptcy Lawyer to Help You Save Your Real Estate
If you are having financial difficulties that keep you up and night and are worried about losing your home, we invite you to meet with the highly qualified NJ bankruptcy lawyer at Garland & Mason, L.L.C. Call (732) 358-2028 or contact us online for a free, confidential initial consultation.
Our Manalapan law firm serves businesses and individuals in Mercer, Monmouth, Ocean, Middlesex and surrounding counties of New Jersey.