How A St. Louis Bankruptcy is Used to Stop a Home Foreclosure

One of the most harrowing things a person can live through is a potential foreclosure of their home. If for no other reason, your home is a sanctuary, a place where you feel safe, where your family was raised and cared for. But what if the mortgage company makes it clear that they wish to take the house back? What options do you have? Well, the most significant legal tool you have at your disposal is a St Louis bankruptcy (specifically a Chapter 13). In this article, I would like to discuss how that process works.

Before we get too far into this discussion, we should probably cover the main reasons for why someone would be facing a foreclosure in the first place. And the most common reason for a foreclosure is pretty straightforward: it is because the homeowner has missed several mortgage payments. The remedy for the mortgage company for nonpayment is to foreclose the note (which is to say, that the lender is seeking to break the contract between the bank and yourself so that it can take the collateral back). How many monthly payments do you have to miss first before foreclosure proceedings begin? It will depend largely on which mortgage company you are dealing with. I have seen some lenders wait until a full year of payments have been missed; and then I have seen them pull the trigger after only three consecutive months of nonpayment.

Legally, the mortgage company has to send you several notices of its intent to foreclose before it can take any aggressive action. For instance, there is usually several “Late Notices” that are sent to you when you miss a payment. Then the mortgage company will mail you a “Notice to Cure” (which is basically putting you on notice of the fact that you have the right to come current on the note before any further steps are taken). And eventually, the lender will turn the matter over to a law firm for the rest of the ride. This law firm will normally send you three letters (two by regular mail, and one that is sent certified). The first two letters will be pretty standard fare with boilerplate language. But the jist will simply be something along the lines of “You have fallen behind on your payments. This is your last chance to come current before we move forward with a foreclosure.”

The last letter (which by law needs to be sent certified) will put you on notice as to the foreclosure sale date. This date will be roughly 20-30 days after the notice is sent. A foreclosure sale of a home is usually done “on the courthouse steps”. This simply means that on the designated date and time, a government official will basically auction off the property to the highest bidder. And if no one shows up to the foreclosure sale, then the ownership of this particular piece of real estate will go back to the bank. But regardless, whoever ends up purchasing the house will no be the rightful owner (in other words, you will no longer own the house).

So how does we prevent all of this from happening? How do we make sure that you keep your ownership interest in the property? By filing a St Louis Chapter 13 bankruptcy! This type of bankruptcy is described as a repayment plan over the course of three (3) to five (5) years during which certain debts are paid back (such as car loans, back child support, and certain tax debts). But this repayment plan will primarily pay back all of the mortgage arrearage that exists. “Mortgage arrearage” is a fancy way of describing the amount of money you have fallen behind on your mortgage. So instead of paying off the arrearage in one lump sum, the Chapter 13 repayment plan allows you to get caught up over a period of several years.

How quickly will it take for the St Louis Chapter 13 to go into effect? Immediately. That is why it is so important to ensure that a case is filed before the foreclosure sale actually occurs. Because if we file a Ch13 after the sale is complete, then the house will be long gone. In some situations, it is even necessary to file an emergency Chapter 13 bankruptcy (like when we file a case on the evening just before the sale is to take place the following morning). Ideally, we would file your case with plenty of time to spare!!

Once the case is filed, the bankruptcy court will provide us with a case number. This number is then given to the law firm representing the mortgage company. The case number is proof that a bankruptcy has been filed, and that the “Automatic Stay” has gone into effect. The Automatic Stay is the most powerful provision of the Bankruptcy Code. It basically means that once you have a case number in hand, all creditors have to cease any and all collection activity. In most instances, that would mean no more phone calls, no more letters, no more lawsuits, no more wage garnishments – basically no more attempts of any kind to get something out of you. And it just so happens that the Automatic Stay applies to foreclosures!!

So how do you come current on the amount that you have fallen behind on your mortgage? This amount is paid through the Chapter 13 repayment plan (but spread out over several years, so that there is no lump sum payoff). Let’s say that you missed five monthly mortgage payments of $1,000 each (and therefore you have fallen into arrears of $5,000). This $5K is spread out into monthly payments over the course of a few years (along with any outstanding car notes, back child support, tax debt, and potentially some of your unsecured debts). So long as you make your Chapter 13 payment on time, there should be no issue! You will get to keep your home!!

There are a few other things that should be pointed out about the relationship between a foreclosure and a St Louis Chapter 13 bankruptcy. For instance, although the mortgage arrearage (i.e. the amount you had fallen behind by) is paid back inside the Ch13 plan, you will have to start making your regular monthly payments to the bank moving forward. A lot of people are under the impression that once they file a Chapter 13 (which stops the foreclosure and puts you into a repayment plan to get caught up), that they can continue to forgo paying on their normal monthly mortgage payment. This is a mistake that quite a few folks make. But the problem of course is that if you do not restart the regular monthly mortgage payments after the Ch13 is filed, then you will find yourself right back in same hole!!

There is no doubt that the stress involved with the possible loss of a home can be overwhelming. And if you want to save the house, you certainly will want to hire not just an experienced law firm, but one that has tremendous expertise in saving homes! Our firm has filed hundreds of Chapter 13 cases specifically designed to protect a home against a foreclosure. So please do reach out to us as soon as possible (because obviously, time is of the essence in regards to this kind of thing)!! We look forward to hearing from you.

At The Bankruptcy Company, we want to make sure that you receive the very best bankruptcy services in all of the St Louis Missouri area. Our team will get you back on your feet, help to dramatically improve your financial standing, and put you in the best position possible for the future. The attorney fees for a standard St Louis MO Chapter 7 are $675, and the upfront fees for a St Louis MO Chapter 13 are $300. But the initial consultation is free of charge!!