Dear Bankruptcy Adviser,
I am divorced. I lost the added income from my ex-husband. I was working, but now the only income I have is a small disability check. My house is in foreclosure, and I have had to use my credit cards for living expenses. Can I file Chapter 7 bankruptcy and save my home, or is it too late?
Sorry about your situation. I hope you can keep your home; I just don't see many options unless you can draw more monthly income.
You say that you want to file Chapter 7 bankruptcy to save your house. This will not halt the foreclosure, only delay it -- in some cases, only for a month or two.
When you are delinquent on your mortgage and then file Chapter 7 bankruptcy, it stops the foreclosure procedure. The lender can make a request to the court to remove the house from bankruptcy protection, also known as a "relief from stay." Getting this relief means the lender can continue with the foreclosure process.
The lenders are usually very efficient in asking for that relief. Some lenders file the motion within a week or two of receiving the bankruptcy notification. The lender sets the motion for a hearing and offers evidence that you are delinquent on the mortgage. You don't have much of a defense against the motion unless you are able to prove you are current on your payments.
Each state has specific foreclosure procedures the lender must follow. In some cases, people file bankruptcy long before a foreclosure sale date has been set. The lender cannot accelerate the foreclosure process simply because the homeowner filed bankruptcy.
You can also work on a loan modification with the lender throughout the bankruptcy. Some lenders may wait until receiving the relief from stay, but others will work with you during and after filing this motion.
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However, without additional income, such as alimony from your ex-husband or by finding renters, you are likely to lose your house. A modest disability check probably won't be enough for the lender to agree to a loan modification.
Sorry to give you more bad news. The only good news is that if you live in a state in which you are liable for any existing mortgage balance after foreclosure, the bankruptcy filing would eliminate that liability. It is hoped you can find the additional income, so you can afford a modified mortgage payment and keep the house.