One of the major benefits of filing for bankruptcy is the automatic stay. From the date of the bankruptcy filing, an automatic stay is enforced which puts a hold on all collection actions including threatening phone calls and messages, repossession, and foreclosure. This has to be abided by all parties concerned and failure to do so can result in a legal battle as was seen in case of Caridad Hileman. The California resident filed for Chapter 13 bankruptcy but her case was dismissed. She didn’t want to lose her house to foreclosure, hence she filed again after a few months.
Since Caridad filed for bankruptcy a second time within a year, the automatic stay could last only for 30 days, as per 11 U.S.C. § 362(c)(3). The automatic stay can be extended but she was a day late to file for an extension and thus the automatic stay expired. Despite everything, Caridad continued making payments for her home till the bankruptcy plan was officially confirmed where a major part was made up for mortgage payments.
She was supposed to pay court-mandated payments for the entire duration of her bankruptcy and continue making payments till she cleared the dues. Since she didn’t want her bankruptcy case to be dismissed again, Caridad continued making payments, but was shocked to find that the bank refused payments just one month after confirmation of her repayment plan! Despite the court’s confirmation of the Chapter 13 plan, the bank proceeded with foreclosure. Despite Caridad making payments, the bank argued that since automatic stay had expired, they have the rights to foreclose.
Can lawyers help in such cases?
Forced with no other choice, Caridad filed a petition in the court against the bank. The court ruled in her favor as a confirmed plan is binding to both the debtor and the creditor. Just like debtor cannot refuse to make payments as per the repayment plan, the creditors also cannot foreclose or repossess the property. The creditors can object or reject a repayment plan while it is under consideration by the court. However, once it is confirmed, they have to abide by it, even if it is done despite their objections. Since the bank had not filed any objection against the plan and also not appealed to it, they were bound by the plan and had to continue accepting the mortgage payments as well as abandon foreclosure proceedings.
According to Los Angeles based bankruptcy law firm Recovery Law Group, foreclosure can only take place if the bankruptcy case is dismissed. This takes place if the debtor has defaulted on making payments. In case of extension motion was filed on time by Caridad, she would not have to have to fight the case against the bank in court. Following the plan is extremely essential if you wish to protect your assets from repossession or foreclosure. In case you are facing problems managing your finances and find dues accumulating, it is time to consult a bankruptcy attorney. Call 888-297-6023 to have a free consultation regarding your case.