Not everyone who files bankruptcy does so to discharge consumer debt, or even to discharge an underwater secondary mortgage. Rather, many people file bankruptcy because the automatic stay that enters into place halts foreclosures. Although this can be a powerful tool, there are drawbacks to using the bankruptcy code this way. Here are seven examples.
- Because you are not seeking a discharge you won’t necessarily get the full benefits of the bankruptcy. Although you will still be able to refile and seek a discharge later if you do not receive one the first time, your bankruptcy will appear on your credit report nonetheless.
- Timing is crucial. Many people file bankruptcy too early because they wrongly believe they are about to be foreclosed upon. It’s important to know that missing a payment or two won’t trigger a foreclosure, but multiple months of missed payments will. Thus, filing too early means you are preventing a nonexistent foreclosure.
- In the time period between missed payments and foreclosure you can negotiate a refinancing or modification, or offer the deed in lieu or proceed with a short sale. A Las Vegas bankruptcy lawyer can help you effect any of these outcomes and can even represent you in foreclosure mediation.
- By contrast, it’s also easy to file too late. The Bankruptcy Code requires people to obtain credit counseling within the 180-day period before filing. If you can’t get around to doing that before the foreclosure sale occurs, you will either be too late, or your case will be dismissed so quickly that filing bankruptcy will not have helped one bit.
- Bankruptcy alone won’t fix your mortgage problem. It only delays the foreclosure. To change the outcome, you will have to use the time the automatic stay affords you to execute one of the options listed in point number (3) above.
- Moreover, even if you file in Chapter 13, and you cannot make your mortgage payments then the mortgagee will simply file a motion with the bankruptcy court asking it to lift the automatic stay on your house and resume foreclosure proceedings.
- Worse, if you overshoot and obtain a discharge, you will be unable to obtain another one for eight years, meaning any deficiency in your mortgage will not have been discharged.
Timing your bankruptcy and using the Bankruptcy Code strategically to ensure you obtain the results for your personal case is why it’s important to hire an experienced Las Vegas bankruptcy lawyer, even if all you need to do is delay a foreclosure by filing bankruptcy.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.