How Long can I Wait to File Bankruptcy to Stop Foreclosure if my Mortgage Company is Modifying my Loan in Georgia?

Mortgage modifications in Georgia are becoming increasingly popular amongst homeowners as a loss mitigation option against foreclosure. Unfortunately, home loan modifications in Georgia and across the country are often lengthy and disorganized and cause homeowners to end up with a foreclosure notice at the end of the modification process. Filing Chapter 7 or Chapter 13 bankruptcy is last resort but is an effective method of stopping a foreclosure in Georgia. You can file bankruptcy as late as the day before foreclosure to stop the bank from selling your house, but it is preferable that you file your bankruptcy case at least the Friday before the foreclosure is scheduled.

Filing Chapter 7 in Georgia will at least temporarily enable you to keep your house for a few months during the pendency of the bankruptcy case before the bank will schedule another foreclosure. Of course, if you are signficantly behind on your mortgage payments, you will have to catch up the arrears with the bank or work out a modification in order to keep your home long-term. Most people who file Chapter 7 bankruptcy and are very far behind on their mortgage payments are not able to ultimately keep their houses unless a home loan modification is approved and the mortgage company agrees to put the past due mortgage payments on the back end of the loan.

On the other hand, filing Chapter 13 forces the bank to allow you to repay your arrears in a consolidated monthly payment and provides a plan to keep your home long-term. However, if you cannot afford your monthly mortgage payment in the first place, then Chapter 13 may not be able to assist you absent a home loan modification that will decrease your monthly mortgage payment. In some cases, you may be able to get rid of your second mortgage debt in Georgia through a Chapter 13 if your house is underwater in a process that is known as “lien stripping.” Under this theory, if your house is worth so little that the second mortgage lender would not receive any money in the sale of the house, then it should be considered an “unsecured debt” or a debt that is not attached to the house.

No matter how badly you wish to keep your house, one thing that I tell my clients is if you cannot afford the house and it is worth less than you owe on it, then think about walking away from it after you file bankruptcy in Atlanta, Georgia because your mortgage debts are wiped out when the bankruptcy case is complete. One way to look at whether it is worth the monthly payment that you are making is to see how much it would cost to rent a comparable home in your area; if it costs significantly less to rent your house than the price of your monthly mortgage payment, you may want to rethink keeping your house.

A qualified bankruptcy attorney in Atlanta, Georgia will be able to help you decide if filing Chapter 7 or Chapter 13 is a good way for you to stop a foreclosure. Please contact the Law Offices of Charles Clapp at 404.585.0040 for a free consultation with an attorney.