If you wish to keep your home, filing a chapter 13 bankruptcy is likely your best option. A chapter 13 bankruptcy allows you to develop a repayment plan that will spread out your debts over a three to five year period.

1. SAVING YOUR
HOME THROUGH
BANKRUPTCY
ERIN B. SHANK
CENTRAL TEXAS BANKRUPTCY ATTORNEY

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If you wish to keep your home, filing a chapter 13 bankruptcy is
likely your best option. A chapter 13 bankruptcy allows you to
develop a repayment plan that will spread out your debts over a
three to five year period.
Over the past several years the U.S. have faced a number of financial
difficulties, especially regarding home loans.Although it appears as though
we may finally be climbing out of the recession, the damage that has been
done to millions of hard-working Americans remains. For many, the most
immediate threat is foreclosure. Many Texans are facing the threat of
foreclosure of their home.Bankruptcy may be a solution to both the
immediate threat of home foreclosure and your overall financial problems.
WHAT IS FORECLOSURE?
Most homebuyers do not have the
cash needed to purchase a home.
Therefore, they must borrow the
majority of the funds needed for
the purchase from a bank or other
lender. This type of loan is
referred to as a mortgage loan.
The borrower agrees to make
monthly payment to the lender until the loan is repaid in full, typically over
the course of 15-30 years. When you take out a mortgage loan you also

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typically agree to use the property you plan to purchase as security for the
debt. If you default on the loan the lender has the right to take the property
used as security to satisfy the loan. The legal process by which a lender is
allowed to do this is referred to as “foreclosure”.
THE TEXAS FORECLOSURE PROCESS
In Texas, most foreclosures are non-judicial, meaning they do not require the
intervention of a court. For a borrower, this means that the foreclosure
process can be significantly shorter in Texas than it is in other states. A
borrower is technically in default on a mortgage loan when a single payment
is late. Most lenders, however, will attempt to work with a borrower who
appears to be in financial trouble before rushing to foreclose on the loan. If
the lender does decide to proceed with foreclosure, the steps required are as
follows in most foreclosures:
1. Notice of Default. The lender is required to provide notice of the
default, in writing, to the borrower and provide the borrower with 20
days within which to “cure” the default. “Cure”, in this context, is simply
a legal word for “fix” or “correct”. If the borrower fails to cure the
default, or otherwise halt the foreclosure proceedings, the lender may
proceed with the foreclosure.
2. Notice of Sale. At least 21 days must pass after the initial 20 day sure
period before a foreclosure sale may be scheduled. The lender is

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required to notify the borrower in writing as well as post the notice at
the county courthouse and file it with the county clerk. All sheriff sales
are held on the first Tuesday of the month in Texas.
3. Foreclosure Sale. The property is auctioned off to the highest bidder
at auction on the day of sale.
Unlike some other states, Texas does not have a right of redemption,
meaning that the borrower does not have a “redemption” period during
which he or she may still pay off the loan and redeem the property after the
sale.
Another important point for a borrower to understand about a foreclosure
sale is that the borrower
often still owes the lender
money even after the sale.
Known as a “deficiency
judgment”, a borrower may
still be indebted to the lender
if the amount paid for the
property at sale was not
enough to cover what the borrower owed the lender at the time of sale. For
example, if you owed $150,000 to your lender and your home sold at auction
for $120,000 you could still be indebted to the lender for $30,000. For this
reason alone, even if you are not interested in remaining in your home you

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should still consult with a bankruptcy attorney if you are served with a
foreclosure notice.
HOW CAN BANKRUPTCY HELP?
If you have been threatened with foreclosure, or served with a notice of
foreclosure, bankruptcy may be able to help in a number of ways. First, when
you file a petition for bankruptcy the court will issue an automatic stay. The
automatic stay is a court order prohibiting all creditors from initiating, or
continuing, any attempts to collect on a debt, including foreclosure. This
provides you with an immediate relief from the foreclosure process and
allows you time to work with your attorney to find a permanent solution.
If you wish to keep your home, filing a chapter 13 bankruptcy is likely your
best option. A chapter 13 bankruptcy allows you to develop a repayment plan
that will spread out your debts over a three to five year period. Provided that
you adhere to the plan you will be able to remain in your home. Moreover, at
the end of the repayment plan period, any debts that remain unpaid will
usually be discharged, or eliminated. The end result is that you can save your
home, pay off the majority of your debts, and start over with a clean slate
once the bankruptcy is concluded.
Even if you do not wish to remain in your home bankruptcy may still be able
to help. As mentioned previously, simply letting the lender proceed with the
foreclosure process isn’t always the end of the problem. If a deficiency
judgment is entered against you after the sale of the home you could end up
without a home and still owing for the home. In this case a chapter 7

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bankruptcy may be your best option. A chapter 7 bankruptcy is a much
simpler process, typically concluded in less than six months. At the end of a
chapter 7 bankruptcy, most debts are discharged, meaning you no longer
owe them. If you have additional debts, such as medical bills or credit card
debts, you may be able to include them in the bankruptcy as well.
LIFE AFTER BANKRUPTCY
Borrowers frequently hesitate to consider bankruptcy as a solution when
faced with the threat of foreclosure because they are convinced they will
never qualify for financing again if they go through bankruptcy. Although
each situation is unique, the general rule is that a debtor may qualify for an
FHA or VA loan two years after discharge of a chapter 7 bankruptcy. In a
chapter 13 bankruptcy, a debtor may even qualify during the repayment
period with court approval. Obtaining conventional financing after
bankruptcy will typically require a debtor to wait longer than for an FHA or VA
loan; however, even conventional financing can be secured if you are willing
to wait about four years after a chapter 7 discharge and two years after a
chapter 13 discharge.
For a homeowner who has worked long and hard to be able to afford a home,
the threat of foreclosure can be terrifying. If you find yourself in this position
consult with an experienced Texas bankruptcy attorney immediately to
discuss how bankruptcy can help you.

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REFERENCES
KeepMyTexasHome.org, The Foreclosure Process
NOLO, Summary of Texas’ Foreclosure Laws
US Courts, Bankruptcy

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About the Author
Erin B. Shank
With extensive training and years
of experience helping families
throughout Central Texas, Erin B.
Shank is here to help you conquer
your financial obstacles. Whether
you need guidance and advice
regarding bankruptcy, debt
consolidation, tax debt or other
financial problems, our friendly and
qualified team can help you find
solutions that will enable you to
manage or eliminate your debt.
Erin B Shank, PC
www.centraltexasbankruptcy.com
1902 Austin Avenue
Waco, TX 76701
(254) 296-1161
1711 East Central Texas
Expressway
Suite 107
Killeen, TX 76541
(254) 690-4110