will filing for bankruptcy in long island save my home?

WILL FILING FOR BANKRUPTCY IN

LONG ISLAND SAVE MY HOME?

It Is Important to Understand the Impact of Filing for Bankruptcy On Your Home

Ronald D. Weiss

Will Filing for Bankruptcy in Long Island Save My Home? www.ny-bankruptcy.com 2

If you are behind on your house payments, you may be facing imminent foreclosure action from the bank. Because your home is a secured debt, it is possible for the bank to take your home for nonpayment. There are ways to stop

this process, including negotiating with your lender through mortgage modification programs, which can lower your payment amounts and allow you to refinance to a loan that is more affordable even if you are underwater. However, mortgage modification is not a solution for everyone and can be a long process.

If your foreclosure is imminent, one of the best options you have to stop the foreclosure is to declare bankruptcy. The impact of a bankruptcy on your home is going to vary depending upon what chapter of bankruptcy you file. However, in the vast majority of situations, bankruptcy is a solution that can help you to keep your home.

Bankruptcy and the Automatic Stay

Bankruptcy does not absolve you of your responsibility to pay your mortgage. Because a mortgage is a secured debt, you will be unable to keep the home unless you can become current on your mortgage payments and unless you affirm your willingness to repay the debt.

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However, bankruptcy can still help to save your home in large part because of rules related to automatic stays. As soon as you file for bankruptcy protection, an automatic stay goes into effect. This stops lenders from pursuing any type of collections activities against you throughout the duration of the bankruptcy, unless the lender goes through a process that involves filing a motion for relief from the automatic stay.

Because the automatic stay stops collections activities, a bank will not be able to pursue foreclosure. As your bankruptcy moves forward, you can use that time to try to negotiate with the mortgage lender to find an alternative to foreclosure through mortgage modification programs. The bankruptcy, in a sense, buys you time to work out a way to save the home. The bankruptcy can also buy you time to raise money in order to become current on the mortgage debt that you owe so the bank does not foreclose.

The automatic stay applies to both Chapter 7 and Chapter 13 bankruptcy, which are the two most common types of consumer bankruptcy. However, these chapters of bankruptcy are very different and can provide different solutions to help you protect your home.


Chapter 7 and Your Home

When you file for Chapter 7, you will have eligible debts discharged in the bankruptcy. This means that debts like credit cards and other unsecured debts are forgiven and no longer need to be paid back. When you have been relieved of responsibility for paying most of your debts, your mortgage payment may become affordable. You can reaffirm the debt on the home and, as long as you become current and continue to pay, you will be able to keep your home.

Chapter 7 does require a sale of some of your non-exempt assets in order to file for bankruptcy protection. Homestead exemptions, however, allow you to keep most of the equity in your house. This means unless you have a home that is worth far more than what you owe on it, your interest in your home is not affected by the bankruptcy process.

Chapter 13 and Your Home

When you file Chapter 13 bankruptcy, you do not have to sell any assets but you do need to enter into a repayment plan agreement with creditors that could last for as long as three to five years. Your debts

A chapter 13 bankruptcy makes lien stripping possible as long as you can prove the

second mortgage holder would not be paid back money if the home was

foreclosed on.


are not just forgiven in a chapter 13, as you are required to complete this payment plan and pay back a portion of what you owe.

When determining your monthly payments under Chapter 13, you will need to be able to pay your mortgage in full to keep the house. However, there is a limited exception to this rule in cases where you have a second mortgage or other non-primary mortgage on your home.

When you have two or more mortgages on your home, the first mortgage is the primary mortgage. When foreclosure for nonpayment forces a sale of the house, the proceeds must go to pay off the first mortgage in full before the second mortgage holder receives any funds.

If the sale of your home would not generate enough money to pay off the first mortgage and still have funds left to pay to the second mortgage lender, then the second mortgage is not really a secured loan and the lender does not really have a security interest in the house. In situations like this, a process called lien stripping can reclassify the second mortgage debt as the unsecured debt that it actually is.

A chapter 13 bankruptcy makes lien stripping possible as long as you can prove the second mortgage holder would not be paid back money if the home was foreclosed on. The newly unsecured debt can then be


included in your chapter 13 repayment plan and you may be able to pay back less than the full amount due. This means lien stripping allows you to keep your home without paying back all mortgages in full.

An experienced Long Island bankruptcy attorney should be consulted to assist with a Chapter 13 mortgage that involves lien stripping, as these cases can be very complicated.


About the Author

Ronald D. Weiss, Esq.Ronald D. Weiss, Esq., is an attorney who since 1987 has specialized in bankruptcy solutions, foreclosure solutions, and modification and negotiation solutions for individuals and businesses in the greater Long Island and New York areas undergoing financial hardship.

Mr. Weiss is a member of the American Bankruptcy Institute, the National Association of Consumer

Bankruptcy Attorneys, the Suffolk County Bar Association and the Nassau County Bar Association, and is admitted to practice in the State of New York, the State of Connecticut, and the federal courts for the Eastern and Southern Districts of New York. Mr. Weiss is a 1988 graduate of New York University School of Law where he was a recipient of the Galgay Fellowship in Bankruptcy and Reorganization Law and has published several law journal articles. Mr. Weiss’ past experience includes having been a law clerk to the Honorable Prudence B. Abram, a United States Bankruptcy Judge in the Southern District of New York, and having practiced corporate bankruptcy law at several large Manhattan law firms, including Moses & Singer, LLP, and Walter, Conston, Alexander & Green, P.C. Mr. Weiss later worked for Fischoff, Gelberg & Director in Garden City, NY where he had practiced consumer and business bankruptcy before starting the Law Office of Ronald D. Weiss, P.C.

Mr. Weiss started the Law Office of Ronald D. Weiss, P.C. in 1993, which has been located in Melville, New York since its inception.

Please call us at (631) 479-2455, or e-mail us at [email protected] for a free consultation to discuss your legal options in greater detail.

Ronald D. Weiss, P.C.734 Walt Whitman Rd. Suite 203Melville, Suffolk, NY 11747 www.ny-bankruptcy.com

http://www.ny-bankruptcy.com/

will filing for bankruptcy in long island save my home?

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