COLORADO BANKRUPTCY LAWS AND FORECLOSURE
Falling behind on your mortgage can make your world feel like it is falling apart. It’s important that you take action as quickly as possible; if you wait too long, you may find your options to be limited.
Chapter 13: Using Bankruptcy to Catch Up
Filing Chapter 13 Bankruptcy gives you the ability to stop a foreclosure and catch up on your past due mortgage payments over a 3-5 year period. This is especially useful for people who have fallen behind on mortgage payments due to a temporary financial setback such as illness or unemployment, and who are now able to catch up over time. It’s important to speak with an experienced Colorado bankruptcy lawyer before filing a Chapter 13 Bankruptcy because your ability to stop the foreclosure may be limited if you’ve been in Chapter 13 Bankruptcy in the past.
Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.
Mortgage Modification or Refinance: You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.
This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan. Your lender may allow you to do this if you are able to guarantee a quick sale of your property and can meet your lender’s guidelines.
Chapter 13 Bankruptcy Option
If you can now afford to make your mortgage payments, but still wish to sell your home, filing a Chapter 13 Bankruptcy will cancel the scheduled foreclosure sale and give you time to list your property for sale to gain more profits and net proceeds from your home than you would typically earn at a foreclosure sale.
Deed-In-Lieu Of Foreclosure
As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house, but it is not as damaging to your credit rating as a foreclosure. Your lender may be willing to accept a deed-in-lieu of foreclosure if you are in default and don’t qualify for any of the other options, your attempts at selling the house before foreclosure were unsuccessful, and do not have a second mortgage on the property.