New York’s eviction and foreclosure moratorium expired on Jan. 15, potentially leaving thousands who are financially struggling as a result of the pandemic to face eviction. The moratorium was initially in place as an emergency response to the pandemic, but the state of emergency was lifted last June.
With so many people still reeling from the economic impact of the pandemic, many will be facing the consequences of debt and considering their options for debt relief. Inevitably, the end of the moratorium will lead to a rise in bankruptcy cases and foreclosure lawsuits.
How Bankruptcy Can Help
Until Jan. 15, landlords and lending institutions were blocked by state law from foreclosing upon and evicting occupants who fell behind on rent or mortgage payments. Now that the moratorium is over, these entities are bound to pursue collection actions up to and including eviction.
If you are at risk of losing your home, you might be able to buy some time and even get relief by filing for bankruptcy. Whether you file for Chapter 7 or Chapter 13, the court will place an automatic stay on creditors’ collection actions until your case settles. This means that lenders and landlords will once again be temporarily prohibited from pursuing foreclosure and eviction while you’re in bankruptcy.
Filing for Chapter 7
If you are dealing with overwhelming consumer debt, filing for Chapter 7 can provide the relief you need to once again afford your rent or mortgage payments. By choosing Chapter 7, you will disclose all of your property and assets to the court, which will assign a trustee to your case. The trustee will assess your property and liquidate non-exempt property, using the cash to pay off your creditors (any remaining debt after liquidation is often discharged by the court).
Property that can be exempted from Chapter 7 includes clothing, furniture, household goods, one vehicle, certain appliances, tools of your trade, and other such items. This makes it possible to retain much more of your property during liquidation than most people believe is possible.
Filing for Chapter 13
If your debt largely consists of mortgage arrears, filing for Chapter 13 may be the better option for you. This is because Chapter 13 focuses on repaying debt by reorganizing it, often by putting the borrower on a repayment plan that lasts for three to five years.
Ideally, the lender will allow a forbearance on the mortgage to pause new payments – or provide new payments at a reduced rate – until the mortgage arrears are fully repaid through the Chapter 13 plan.
Once forbearance is over, the borrower is responsible for catching up. If the borrower still owes back payments after exiting forbearance, a deferral may be issued on these payments. A deferral is different from a forbearance in that it places any missed payments during forbearance onto the end of the mortgage. These payments then become due only after the rest of the mortgage is paid off, the home is sold, or the home is refinanced.
Are You Facing Eviction?
If you are at risk of eviction because the moratorium ended on Jan. 15, reach out to our attorney at Law Office of Seni Popat, P.C. for help. Our attorney has more than a decade of experience helping those in dire financial situations get the relief they need at crucial times in their lives.
Learn more about what we can do for you during a free initial consultation. Call (718) 340-3385 now to schedule yours.