WILL FILING BANKRUPTCY STOP HOME FORECLOSURE?
Filing either a chapter 7 or 13 bankruptcy case will immediately stop a home foreclosure proceeding. However, your bankruptcy case will need to be filed prior to the sheriff sale date. Another option besides bankruptcy is simply contacting the mortgage company and requesting a loan modification. Many mortgage companies will work with you to keep you in your home. My office realizes that the prospect of losing your home and having to move can be stressful.
From the start of the home foreclosure to sheriff’s sale normally takes about four to six months. While the foreclosure is progressing, the mortgage company is incurring attorney fees, home inspection fees, and paying force placed homeowner’s insurance. If you desire to keep you home, it is normally best to be proactive by starting right away with your bankruptcy case or working on a loan modification.
Under a Chapter 13 bankruptcy, you may be able to eliminate any home equity loans, or any 2nd and 3rd mortgage loans. This is known as “stripping off” or “avoiding” junior liens on the home. The situation where a lien can be stripped is where the home’s value does not exceed the amount owed on the first mortgage. In other words, if the home were sold, there would be no funds available to pay the home equity loan, or any 2nd and 3rd mortgages.
If you desire to keep your home, you will need to file a chapter 13 case. In a chapter 13 case, you will need to pay the ongoing monthly mortgage payments, but the entire mortgage arrears over a period of three to five years. In some situations, it may not be worth keeping your home. Your may not have enough funds in your monthly budget to pay the ongoing mortgage payment plus a payment to bring current the mortgage arrears within three to five years. You may also owe substantially more that the value of the home. Why try to save a home worth say $100,000 when you have an outstanding mortgage balance of $130,000. You probably be better off surrendering the home to the mortgage company. Within two years or so after your bankruptcy case is complete, you should be able to purchase another home provided that you are employed and have the resources to remit a regular monthly mortgage payment.
Should you desire to surrender your home to the mortgage company, but need more time to find alternative housing, filing a chapter 7 bankruptcy case will extend the time you can reside in the home for an additional three months or even much longer. However, under a chapter 7 bankruptcy case, if you do not bring current the mortgage payments, you will ultimately lose your home.
WILL FILING A BANKRUPTCY STOP A SHERIFF SALE?
Filing an Indiana Chapter 13 or 7 Bankruptcy petition will stop a sheriff sale. Should you file a chapter 7 bankruptcy case, the sheriff sale will be postponed for a period of at least three months. Filing a chapter 13 bankruptcy case will give you an opportunity to bring current the mortgage arrears within 3 to 5 years. Upon the completion of the required plan payments, the foreclosure proceeding will be dismissed. Should a sheriff sale be scheduled for your home, it will not be too late to save your home through a chapter 13 bankruptcy case. However, the bankruptcy case will need to be filed prior to the sheriff’s sale date. Once a sheriff sale has been completed, in most cases it will be too late to save your home. Under the Indiana Code, you will have one year from the sheriff sale date to pay in full a redemption amount. In general, the redemption amount is the buyer’s purchase price for the home plus interest. For most individuals, paying the redemption amount is unfeasible.
CAN TAX DEBT BE DISCHARGED IN BANKRUPTCY?
Certain income tax debt can be discharged in bankruptcy. This is a somewhat complicated subject matter. Provided that you have timely filed all Income Tax Returns, you can receive a discharge of income taxes for returns filed more than three years prior to a bankruptcy case filing.
Regarding Income Tax Returns that were not timely filed, you can generally obtain a discharge of those income taxes if the returns were filed more than two years ago. Regarding Internal Revenue Service or Indiana Department of Revenue assessments, you can obtain a discharge of the assessments provided that the assessments were made more than 240 days prior to a bankruptcy filing.
Also, a statute of limitation applies to both the Internal Revenue Service and Indiana Department of Revenue for the collection of delinquent income taxes. Provided that all returns were filed, the Internal Revenue Service and Indiana Department of Revenue has ten years to collect delinquent income taxes. There are exceptions which can extend the statute of limitations.
WILL BANKRUPTCY STOP WAGE GARNISHMENTS?
Indianapolis Bankruptcy Attorney David Mathies can stop wage garnishments within days of your scheduling an appointment with my office. Once your bankruptcy case is filed, my office will immediately contact your payroll department with instructions to immediately terminate the wage garnishment. If the garnishment should continue after your case is filed, my office will request a refund of the garnished amount. However, any wages garnished prior to your case being filed will likely be unrecoverable.
WILL BANKRUPTCY AFFECT MY CREDIT SCORE?
Prior to filing for bankruptcy, your credit score has probably reached its lowest point. Normally, filing bankruptcy will help rebuild your credit. Your credit score is important for one reason, to assist potential new creditors decide whether to extend creditor, determine how much credit to extend, and determine the appropriate interest rate. Regardless of how bankruptcy may affect your credit score, you will be able to obtain credit soon after your case has been completed.