How a Chapter 13 Bankruptcy Can Avoid a Sheriff’s Sale in St. Paul, Minnesota
If you are a homeowner faced with a sheriff’s sale date, a Chapter 13 bankruptcy can be an avenue to stop the sale. A sheriff’s sale is the date that a house is sold at a public auction. In order for a homeowner to stay in a house, it is crucial to avoid the sheriff’s sale. A Chapter 13 bankruptcy is a type of bankruptcy in which a debtor repays creditors through monthly payments, lasting three to five years.
Most of the time, a debtor filing a Chapter 13 pays back only a small portion of all of their debts; the remaining debt not paid off in three to five years will be wiped out, tax free, forever. A Chapter 13 bankruptcy allows a debtor to pay mortgage arrears through the Chapter 13 bankruptcy and reinstate the loan. In the meantime, the debtor is protected from all creditor action and collection efforts throughout the entire three to five year time period, as a result of the automatic stay. Once a debtor files a Chapter 13 bankruptcy, the foreclosure sale will immediately stop. In addition to filing a Chapter 13 bankruptcy, a debtor has several other options to stop a sheriff sale. A debtor can prevent the sheriff sale through reinstatement, by paying the full amount of arrears that are past due, which would bring the mortgage loan current. A debtor could also file for a postponement of the sheriff’s sale. However, this must be done at least fifteen days before the sheriff’s sale date. The caveat to this is that the postponement will delay the sale for five months, but will shorten the six month redemption period to five weeks. Additionally, another option a debtor has is to work out an agreement with the mortgage company. A debtor can agree with their mortgage company to a repayment plan, whereby the debtor makes larger payments each month. Moreover, a forbearance is another option that provides the debtor with a temporary pause on mortgage payments. A debtor can also explore the option of a loan modification, as well as a deferral of the past due arrears to the end of the loan. In summary, as long as a sheriff’s sale has not taken place, a Chapter 13 bankruptcy can stop the sale and prevent creditors from continuing to pursue any legal action against a homeowner. The stopping of a sheriff’s sale will allow a homeowner to pursue different avenues in order to get caught up on missed mortgage payments.
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To learn more about the process of a Chapter 13 bankruptcy and how it can stop a sheriff’s sale, come visit us at our new office in St. Paul, Minnesota, or come visit us at LifeBackLaw.com!