Many people in financial duress get behind on their mortgages. The question of whether or not you will be able to keep the home depends on where you fall on the timeline of mortgage delinquency and foreclosure.

Delinquency of mortgage payments

If you are a number of payments behind, usually within 45-60 days, you are considered delinquent. At this point, you may be able to negotiate a loan modification with the Federal National Mortgage Association, also known as Fannie Mae. A loan modification changes the terms of your original mortgage by altering the payment amount, interest rate, balloon payments, or the length of the loan to help you keep your home.

If you file bankruptcy at this point in the process, keeping your home is possible. Once the bankruptcy case is filed with court, the automatic stay will stop the bank from proceeding to foreclosure. They will likely file a motion to lift the automatic stay with the bankruptcy court, and at that time, your attorney can object to the motion, or negotiate an agreed order with the bank arranging for you to make up the payments and stop the stay from being lifted.

Mortgage default

After 90 days of delinquency, lenders generally declare that you are in default of your mortgage. This means that your loan moves to their foreclosure department and they will initiate foreclosure proceedings to repossess your home.

Once the bank files foreclosure with the County Court of Common Pleas, you will have been served papers by a sheriff or received it by certified mail. Within 28 days from the date you get those papers you can respond to object to the foreclosure. If you file bankruptcy within that time, or before the bank files a motion for default judgment prior to the home going to a sheriff’s sale, the sale would have to be cancelled due to the automatic stay that goes into place when the bankruptcy case is filed.

At this point, as the home has not been repurchased by the bank, you still have the same options for loan modification, or an agreed order to cure the default.

Residential home foreclosure

If your home has been foreclosed upon, sold at a sheriff’s sale and you are still living there during the redemption period, to keep it you would need to purchase the property. Unfortunately at this point, repaying any past due payments would not cure your default, leaving the only recourse to repurchasing the home in full. Bankruptcy will not save your home, but if the bank has decided to pursue a deficiency judgment against you for the costs of foreclosure that the sale of the home did not cover, then bankruptcy would release you from the obligation to repay.

Other circumstances

Perhaps you are current on your mortgage payments. If that is the case, you can have your attorney prepare a reaffirmation agreement with the bank in which you promise to continue paying on the home as agreed in your loan documents.

Perhaps you have a second mortgage, or a Home Equity Line of Credit that is unmanageable. In that case, you may be able to obtain relief through lien stripping of the second mortgage in a Chapter 13 consumer bankruptcy. You will need to discuss whether lien stripping is an option with your bankruptcy attorney.