foreclosure4Can bankruptcy stop foreclosure? That’s a question many of today’s unfortunate homeowners are facing. Bankruptcy is never something anyone wants to do. It’s a terrible blemish on your credit that stays there for 10 years, and can keep you from getting additional credit or good loan rates. Yet, losing your house is an even worse option, and the prospect of it leads many homeowners to consider options that would normally never cross their minds.

So, can bankruptcy stop foreclosure? The answer is yes and no. It all depends on what kind of bankruptcy you choose. Here are your two options:

1.  Chapter 7 Bankruptcy. In this procedure, all of your assets are liquidated to pay off your debts. The court normally then absolves you of the remaining debts that couldn’t be paid. For some people with no assets, all of their debt ends up getting absolved. A Chapter 7 filing will usually put a temporary stop on foreclosure proceedings, while the case is moving through the court. This may give you some extra time to work out a payment arrangement with your loan company or to sell your home. However, once the bankruptcy case is closed, your lender can resume proceedings against you if you haven’t taken other measures to make good on your mortgage payments.

2.  Chapter 13 Bankruptcy.  If you want to stop your foreclosure through a bankruptcy filing, this is the way to do it.  A Chapter 13 is a re-organization of your debts. Your debts are often consolidated, and you make a monthly payment to the court until your obligations are paid. You can usually include your mortgage in with your other debts, which forces your lender to accept a payment plan from you. You’ll be able to make up your back payments and get back on track with your mortgage this way, and your lender can’t take your home as long as you make your payments to the court on time.

The most important thing to remember is that you need a qualified bankruptcy attorney to navigate this complicated process for you. Fortunately, you can often retain this kind of attorney for less than $500. If you’re facing the loss of your home, it’s definitely worth the money. It will take several months for your case to go through the court system, and your attorney will make sure you understand every step of the process. If you’ve wondered, “Can bankruptcy stop foreclosure?,” you now know the answer. If you’ve decided this may be a good option for you, consult an attorney in your area for more detailed legal advice regarding your particular situation, and get yourself on the road to financial recovery while keeping your home!

This is the fifth installment in our foreclosure series. Be sure to check back for updates…

Filed under: Foreclosure

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