Stopping or postponing a Mortgage Foreclosure and Sheriff Sale are viable options while working with a bankruptcy lawyer to file for bankruptcy. Your mortgage or tax debt and your financial circumstances help to determine what makes the most sense for you.

In some instances, a repayment plan makes sense. Sometimes a forbearance plan may be a good idea and you usually have nothing to lose by asking for a forbearance plan or a mortgage loan modification as long as you are not under the threat of an immediate sheriff sale. It may be possible to get time to sell your property if that is your ultimate goal.

In some cases, if you do not want to keep the property, the mortgage company will let you give them the property in what is known as a Deed in Lieu of Foreclosure. A deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.

If you feel that the mortgage company has acted improperly or unfairly, then you may be able challenge the foreclosure in the State Court. The foreclosure process can take several months or longer depending upon your circumstances.

Sometimes filing a bankruptcy can give you additional time to stay in the property as you work out a payment plan for the debt. The Mortgage Foreclosure is often temporarily stopped by the filing of the bankruptcy.

Chapter 7

A Chapter 7 bankruptcy filing in New Jersey is created to eliminate debt, such as credit card debt, and will not permanently stop a foreclosure action. In most circumstances the Chapter 7 trustee will not seek to sell a foreclosed property. Generally, a Chapter 7 trustee will only seek to sell real estate or other assets that consist of substantial equity. In most cases the filing of the bankruptcy petition, the automatic stay halts a foreclosure. However, a mortgage company can ask the court for permission to continue with the foreclosure if you are not current with your mortgage payments. After the mortgage company obtains permission to proceed with the foreclosure process, the foreclosure action restarts from the point where it stopped due to the bankruptcy filing. The mortgage company can then continue with the foreclosure until the house is sold at sheriff’s sale or the action is resolved in another fashion.

If you need time to get caught up on your mortgage payments and want to keep the property, then filing a Chapter 13 bankruptcy may give you the time you need to get fully caught up on the mortgage arrears for your property.

Chapter 13

Chapter 13 is a reorganization or repayment bankruptcy that allows the debtor to enter into a debt repayment plan to pay back all or some of the debts over a 3 to 5 year period. Once your Chapter 13 case is filed, your creditors file claims that need to be reviewed and, in most cases, the claims become a part of the plan to repay your debts.  

One crucial aspect of a Chapter 13 bankruptcy is that you must have regular income because you will be required to pay both your monthly living expenses and a repayment of some or all of your consolidated debts.

A Chapter 13 bankruptcy is very powerful because it provides many debtors a mechanism to stop foreclosures and sheriff sales and stop repossessions and utility shutoffs while catching up on their secured debt.

If the mortgage company has a judgment, you may be able to file a Motion to postpone the Sheriff Sale in the court, asking the Judge to postpone the Sheriff Sale and giving you additional time to work things out.

The Automatic Bankruptcy Stay Brings You Immediate Relief Upon Filing for Bankruptcy

For most debtors, the Automatic Stay provision can help New Jersey and Pennsylvania homeowners who are going into foreclosure. Filing for bankruptcy the first time will immediately enact the Automatic Stay Provision. This provision prevents the mortgage company from proceeding with further action against your home. Your lender must halt the foreclosure or collection proceedings when the bankruptcy case is filed. The Automatic Stay Provision is found under the bankruptcy code 11 U.S.C Section 362 of bankruptcy code explained below.

When you file for bankruptcy in New Jersey or Pennsylvania, an automatic stay is an immediate injunction preventing actions by creditors to collect debts from a debtor who has declared bankruptcy. The injunction begins at the moment the bankruptcy petition is filed. Yes, there are certain exceptions that may apply to your situation. Secured creditors may request the bankruptcy court for relief from the automatic stay if the creditor can show cause (for example, if the creditor is not being paid the regular car payment after filing).

Filing for bankruptcy can stop creditors from contacting you as well as halt lawsuits, wage attachment, bank account levy, utility service shutoff notices, foreclosure actions, auto repossession and eviction.

If you have a mortgage and file a Chapter 13 bankruptcy and want to keep your home, you will be responsible for  making your regular monthly mortgage payment and another payment to the Trustee assigned to your case (called the Chapter 13 plan payment). These monthly payments to the Trustee are used to repay your missed mortgage payments and, in some cases, other debts so you can become current with your mortgage and stop the foreclosure process. Once a Chapter 13 bankruptcy is filed, the mortgage company may be required to continue to accept the regular monthly payments as well as the payments from the Trustee to bring the mortgage current. These provisions can also apply to a delinquent automobile loan.

You can also file a Chapter 13 bankruptcy if you are current with your mortgage or rent your home. A Chapter 13 is often filed when you can repay some or all of your debt over the course of your plan.

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