Business & Finance

Mortgages, Bankruptcy & Foreclosure in New York

Manhattan skyline in New York City

Is a lender foreclosing on your home in New York? This might happen if you’ve been unable to make mortgage payments.

However, maybe you just need more time to improve your financial circumstances. Perhaps you’re wondering whether you can stop a foreclosure from moving forward by declaring bankruptcy.

Does filing bankruptcy stop a foreclosure in New York? Sometimes. The following overview will answer your basic questions on this subject. Consider speaking with an attorney for more information about your specific case.

When Can a Lender Foreclose in New York?

According to New York’s Homes and Community Renewal (HCR) department, the foreclosure process in New York typically involves the following steps:

  • A lender will usually send an Acceleration Letter when a homeowner fails to make mortgage payments for two to three months. The Acceleration Letter doesn’t technically begin the foreclosure process. Rather, it tells the homeowner they have a certain amount of time to pay what they owe. If they fail to do so, the lender may accelerate the mortgage. The homeowner would then have to pay the entire remaining balance.
  • New York State law requires lenders to send pre-foreclosure filing notices at least 90 days before filing official foreclosure complaints. The language of the notice must be very specific. The notice must also provide a homeowner with information about at least five area nonprofit housing counseling services.

A homeowner may not be able to pay what they owe within 90 days of receiving the above notice. A lender can then begin the official foreclosure process. 

You’ll be served with papers if you’re a homeowner and a lender has filed a foreclosure lawsuit against you in New York. Read them carefully. They will provide information about how you may respond and what the deadline is for doing so.

Don’t miss the deadline for answering a lawsuit. The fact that the process has begun doesn’t guarantee you will lose your home. However, if you don’t reply in a timely manner, the court will usually issue a default judgment in the lender’s favor.

Can Bankruptcy Prevent Foreclosure in New York?

Bankruptcy may prevent or postpone foreclosure in New York. How it may do so depends on the type of bankruptcy you file.

You may file Chapter 7 bankruptcy as a means of adjusting your financial circumstances if you just need to free up some extra money to repay late mortgage payments. When you file Chapter 7 bankruptcy in New York, for a period usually lasting two to three months, your creditors won’t be able to pursue you for debts.

Upon the completion of the Chapter 7 bankruptcy process, you may have discharged certain debts, like medical debts. This might be enough to let you become current on your mortgage payments once again.

Filing for Chapter 13 bankruptcy is another option to consider. You may prefer this option if you need more time to pay your mortgage.

Chapter 13 bankruptcy allows you to establish a plan for repaying debts based on your income and overall ability to pay. It may be possible to include mortgage debt in this plan.

The Importance of Professional Guidance

Understanding your options when facing foreclosure in New York can be overwhelming. If you’re not sure whether filing for bankruptcy is the proper way to stop a foreclosure on your home, strongly consider speaking with a legal professional. They can explain your options and guide you through the process.

Roach & Lin, P.C. is a New York law firm offering foreclosure, bankruptcy, eviction, and related cases.