How Can Bankruptcy Help with Foreclosure?
Have your finances gotten so overwhelming that you find it difficult to keep up with your mortgage payments? Do you think foreclosure on your home could happen? It may be time to consider filing bankruptcy.
While bankruptcy cannot get rid of your mortgage, it could help delay or stop a foreclosure. The main way this is possible is through bankruptcy’s automatic stay.
How Automatic Stay Can Help with Foreclosure
The automatic stay is a legal injunction that goes into effect as soon as someone files for Chapter 7 or Chapter 13 bankruptcy. Its purpose is to command creditors to stop collection practices against a debtor during the bankruptcy process. The creditor should not communicate with the debtor and cannot collect the debt any way. This includes foreclosing on a debtor’s home to collect unpaid mortgage.
So, the period of an automatic stay in your bankruptcy would halt the foreclosure process and give you much needed time to figure out what to do. The options you have depends on the chapter of bankruptcy you file and your financial situation.
Chapter 7 Bankruptcy and Foreclosure
The automatic stay in a Chapter 7 bankruptcy could protect you from foreclosure for the 3 to 4 months it may take your bankruptcy to process. You could use this time to save money to go toward catching up on your mortgage and stopping foreclosure. If that is not possible, the automatic stay would still give you time for making other living arrangements.
Chapter 13 Bankruptcy and Foreclosure
The automatic stay in a Chapter 13 bankruptcy could help protect you from foreclosure for 3 to 5 years. Chapter 13 bankruptcy restructures your unsecured debt into a payment plan and allows you to pay those debts back over time. You often pay significantly less than what you owed. A plan can last for 3 to 5 years depending on your financial situation. The arrearages (past-due payments) you owe on your mortgage can be added to your plan and paid overtime. Also, the plan could help you eliminate any secondary mortgages you owe. As long as you pay your repayment plan and your regular mortgage payments, foreclosure will not be allowed during this time. Once you have completed your repayment plan you should be current on your mortgage and the threat of foreclosure stopped.
Getting Help To Stop Your Foreclosure
Foreclosure and bankruptcy can be complicated legal processes. How each works depends on your specific financial situation. It is difficult to understand what actions you should take on your own. Our attorneys have over 20 years of experience helping clients save their homes through bankruptcy. Contact us for a free evaluation of your financial situation and let us see if we can help you.