Having to deal with foreclosure on one property is harrowing enough, but how do you deal with foreclosures on multiple private residences?
The process is actually very similar, because each residence is treated as a separate asset under the law, despite the fact that you obviously have full or part ownership in all of them.
This is a very broad question to answer though because it will depend on how “upside down” each of these homes is, and/or if they’re simply being foreclosed upon because you haven’t made payments on them.
It will also depend entirely on what type of bankruptcy you decide to file for.
How Bankruptcy Can Help
The first thing to be aware of this that filing for bankruptcy provides you with something called an automatic stay from creditors. Put simply, this prevents them from pursuing you for money owed to them, and this includes foreclosures.
Ideally you would do this before your lender decides to foreclose on these properties, but the stay still applies even if the foreclosure process has started.
It’s also worth mentioning that the foreclosure process takes several months to complete, simply because your lender will only use it as a last resort.
Filing for either Chapter 7 or Chapter 13 will trigger an automatic stay, which buys you enough time to decide what to do next.
But the automatic stay under a Chapter 7 filing will expire within no more than six months of the date you filed your petition. This does not happen with a Chapter 13 bankruptcy filing.
In effect, filing for Chapter 7 will simply delay the process of losing your homes, because it offers you no way to catch up on your mortgage payments.
While it does allow you to write off the debt owed on a single home (your primary residence), it is highly unusual for a court or trustee to allow you to retain ownership of a second home as part of the discharge process.
There are exceptions to this rule, but they are very rare.
Chapter 13
If you decide that you want to actually keep these multiple homes, then filing for Chapter 13 is a more sensible approach.
Under a Chapter 13 filing you can put together a 3 – 5 year repayment plan that allows you to bring your mortgage arrears up to date, but you will need to continue making your monthly payments for the entire duration of your repayment plan.
As we mentioned earlier, each of your homes is viewed as a separate asset, so there might be the possibility of selling one or more of the other properties to repay your creditors.
Please bear in mind that your bankruptcy trustee will examine all of your assets and liabilities to determine if you are actually capable of meeting the requirements of a repayment plan that will not only deal with your debts but leave you with enough money to pay for an adequate standard of living.
If you lack the assets or financial resources to meet such a repayment plan, then the trustee will not approve it, possibly until you agree to surrender at least some of your homes to reduce your debt load. Declining the trustee’s guidance on this could result in your bankruptcy filing being dismissed.
Talk To A Lawyer
If you’ve found yourself in a position where you quite possibly have several million dollars’ worth of property in foreclosure, then we would strongly advise speaking to an experience bankruptcy attorney.
The longer you delay this process, the more likely your creditors are to reach that date where they have no choice but to begin auctioning your homes to recoup on their financial losses.