Many Minnesota families may find themselves behind in their house payments and could face a realistic threat of a foreclosure proceeding.
The thought of having to move can compound a family’s financial and emotional stress, particularly if they have strong ties to their residence.
While the best course of action is to talk over these options with an attorney who can give legal advice in light of each family’s unique circumstances, an overview is possible:
Most families will either file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. To review, a Chapter 7 is what people commonly think of bankruptcy.
The family surrenders all non-exempt in property and, in exchange, gets a discharge from personal debt. A Chapter 13 involves the family repaying all or part of their debts under a court-approved plan.
In both cases, the family will usually get the benefit of an automatic stay. An automatic stay stops creditors from taking collection actions while the bankruptcy is ongoing, unless the creditor gets special permission from the court.
An automatic stay applies to foreclosures, so both types of bankruptcy can, at a minimum, give a family the benefit of a few more weeks or even months in their home.
However, a Chapter 7 bankruptcy only prevents the bank from pursuing a family for the delinquent mortgage. If the family is behind, the bank can still foreclose either by waiting until the bankruptcy is over or by seeking permission to foreclose even during the bankruptcy.
On the other hand, a Chapter 13 bankruptcy allows a family to continue to make their current mortgage payments and make catchup payments. If they successfully do so, the family keeps their home.