Whenever any bankruptcy case is filed, the lenders are usually stopped from taking action to collect the debts that were owed at the time of the bankruptcy. This feature of bankruptcy is called the “automatic stay.” The automatic stay, if it applies, stops a foreclosure or repossession from going forward. However, no Chapter 7 bankruptcy filing allows you to keep property that is security for a loan without making payments on the loan. For example, folks with home mortgages and vehicle loans cannot keep their homes and vehicles without making payments. As soon as the bankruptcy case is closed, the automatic stay terminates, and the lender can proceed with foreclosure or repossession. Moreover, if you are not current on payments, the lender may ask the court to terminate the automatic stay while the bankruptcy is still pending, and, in Chapter 7, lenders are usually able to terminate the automatic stay. In order to keep property that is security for a loan in Chapter 7 bankruptcy, you often must enter into a “reaffirmation agreement” with the lender who holds the lien on that property. Typically, lenders will not enter into a reaffirmation agreement unless your are current on the loan.
If you are behind on a home or vehicle loan and can not get caught up, you may want to ask your Bankruptcy Attorney about Chapter 13 bankruptcy. Chapter 13 bankruptcy can enable you to get caught up on the loans and possibly even pay the loans back through the Chapter 13 bankruptcy plan and stop paying the bank directly.
As always, give us a call to schedule a free, no obligation appointment to discuss your situation.