According to GSA Business, the number of foreclosures in South Carolina was down 24 percent in January 2013 as compared with January 2012. This is good news for many homeowners, although South Carolina is still not doing quite as well as the nation as a whole, since the national average number of foreclosures decreased 28.5 percent in January 2013 compared with the same month in 2012.

Unfortunately, there are still plenty of homeowners in the state who continue to struggle. If you are one of them, it is important to understand that filing for bankruptcy protection may be able to help you to save your home. Our Columbia, SC bankruptcy attorneys can help you to understand when and if bankruptcy is a viable option for you in the fight against foreclosure.

Bankruptcy And Your Mortgage

When you file for bankruptcy, the bankruptcy is NOT going to help you to save your house by eliminating your mortgage debt. In fact, if you want to keep your home, you are going to have to keep paying on your mortgage whether you file for a chapter 7 bankruptcy or a chapter 13 bankruptcy.

However, there is a limited exception to this rule for people with certain second mortgages, third mortgages and other non-primary mortgages. If you have a second mortgage or other non-primary mortgage that has no collateral at all, then you may be able to have that mortgage reclassified as unsecured debt in a process called lien stripping. This sounds complicated but isn’t. Basically, what it means is that if your house is worth only enough to pay off the first mortgage, then the second mortgage holder wouldn’t get anything if they foreclosed. They don’t actually have any collateral and the loan isn’t really a secured loan.

If this is the case, then the bankruptcy can reclassify the second mortgage debt as what it actually is: unsecured debt. You could then include it in a chapter 13 repayment plan along with other unsecured debt like credit card debt. You would make monthly payments over time for a period of 3-5 years as determined by the repayment plan created in your bankruptcy and any balance left on your debt would be forgiven.

What if Lien Stripping Doesn’t Apply, Can Bankruptcy Help?

Lien stripping isn’t an option for a lot of residents struggling with foreclosure but this doesn’t mean that bankruptcy can’t help you. When you file for bankruptcy, an automatic stay goes into effect. This stops collection efforts that may be proceeding against you. In other words, the bank can’t proceed toward foreclosing on you. While they eventually can if you don’t get current and start paying, bankruptcy slows the process down and takes time. During this time, you may be able to negotiate a loan modification.

Filing for bankruptcy can also help to eliminate your other non-mortgage debts (under chapter 7) or to make those debts more affordable (under chapter 13). As such, in some circumstances you may be able to fix your other debt problems so your mortgage becomes more affordable and you can keep your house.

If you are considering bankruptcy, contact the Columbia, South Carolina attorneys at Matthews & Megna today at 877-253-7705.