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Personal and Business Bankruptcy: Chapter 7, Chapter 11, Chapter 13

You Can Stop Foreclosure if You File for Bankruptcy in Maryland

You can stop foreclosure on your home in Maryland if you file for bankruptcy. In Maryland, all creditors must stop collection activities against you as soon as they are notified that you’ve initiated a bankruptcy case.

I recently found some interesting statistics regarding foreclosures in Maryland. Across the state, lenders initiated 1,471 new foreclosure cases on homes in August. While that’s down slightly from July’s 1,596 new home foreclosures, it means Maryland still sees about 1,500 new home foreclosures per month. That’s a lot of foreclosures for this little state. As you can probably guess, counties with the most foreclosures were Prince George’s County (488), Baltimore County (164) – not including Baltimore City – and Montgomery County (160). Baltimore City alone had more foreclosures than the surrounding county and more than half as many foreclosures as Prince George’s County with a total of 247 new home foreclosures in August. These statistics come from the RealtyTrac website.

What’s particularly unfortunate is that, based on my experience as a Maryland bankruptcy attorney, many of these homeowners could have stopped foreclosure on their homes if they had filed for bankruptcy in a Maryland bankruptcy court. Many people mistakenly believe that bankruptcy is worse for their credit rating than a foreclosure or that bankruptcy is only for people with thousands and thousands of dollars in debt. Contrary to these beliefs, bankruptcy is often better for a person’s credit rating and is available to just about anyone with more debts than they can pay. Most people who are genuinely trying to keep up on their mortgage but are failing due to a shortage of income or other debts piling up will qualify for bankruptcy and can stop foreclosure on their home.

How to File for Bankruptcy in Maryland and Stop Foreclosure

The first step is to meet with a Maryland bankruptcy attorney and discuss your situation with him or her. While an attorney isn’t required by law in order to file for bankruptcy, a qualified and experienced bankruptcy lawyer can:

  • Help you determine whether bankruptcy will be helpful to you
  • Help you understand the ramifications of bankruptcy
  • Advise you on what chapter of the bankruptcy code to file under
  • Reduce headaches and frustration by ensuring all paperwork is filed correctly and all deadlines are met
  • Increase the likelihood that your petition for bankruptcy is approved and that you get the best results possible

If you and your attorney decide to go forward and file for bankruptcy in Maryland, you’ll then need to file your petition along with financial documents demonstrating your situation and other paperwork. Failing to complete your petition correctly or include all the necessary documents can cause delay in bankruptcy proceedings or even result in your petition being rejected. This is an important reason to work with a Maryland bankruptcy attorney, since your mortgage lender won’t stop foreclosure on your home until your petition is complete and they receive notice of it.

Once the bankruptcy court accepts your petition, the bankruptcy trustee assigned to your case will notify your mortgage lender and other creditors. Upon receiving that notice, all collection efforts — including foreclosure — must be halted. This is referred to as an “automatic stay”.

It’s important to note that, since your mortgage is a secured loan, bankruptcy will not stop foreclosure permanently. While lenders must stop foreclosure immediately after you file for bankruptcy, in Maryland and most other states the lender can ask the trustee to let them move forward with the foreclosure. In a Chapter 7 bankruptcy, this is often allowed because the home will have to be sold to pay off debts anyway. Even if the trustee does not permit the foreclosure to move forward, the foreclosure process will resume once the bankruptcy process is complete.

The advantage of filing for bankruptcy is that it halts the foreclosure process long enough to get your finances in order and possibly negotiate an alternative solution with your lender. If you file Chapter 7 bankruptcy, you may be able to discharge enough other debt that you can then afford your mortgage and the lender may stop foreclosure permanently. However, if you have equity in your home, it is likely you’ll be required to sell your home anyway to pay off the other lenders. However, this is better for you, your mortgage lender and your other creditors than a foreclosure.

If you file Chapter 13 Bankruptcy, which is known as a reorganization bankruptcy, you’ll have an opportunity to reorganize your finances and get back on track so you can continue paying your mortgage. Often, in a Chapter 13 bankruptcy, it is possible to negotiate new payment terms with your mortgage lender and other creditors so you can afford to pay something to everyone for the duration of your payment plan. An experienced Maryland bankruptcy attorney can negotiate the best terms possible. After your payment plan, remaining unsecured debts like credit cards and medical bills are dismissed, which allows most people to afford their mortgage even though it returns to the original payment terms.

In Maryland, bankruptcy attorney John Burns and his firm can advise and represent you during bankruptcy proceedings and in negotiations with your creditors. Call our office at 301-441-8780 to schedule an appointment.

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