Bankruptcy and Foreclosure
Bankruptcy might be a good option if you’re currently facing foreclosure on your home. In some cases it may be able to save your home, while in others it could simply delay the process — but even this may be better for you than immediate foreclosure.
Accordingly, if you are behind on your mortgage payments and think bankruptcy might help, be sure to contact an experienced bankruptcy attorney in your area for advice regarding your situation.
When might bankruptcy help in a foreclosure?
If you’re at the point of foreclosure, it’s most likely because you’ve missed several mortgage payments and have been notified by your lender. There are various ways to try to stop a foreclosure aside from bankruptcy, but if you’re already exhausted all of your options, it might be the right time to turn to bankruptcy.
How can bankruptcy help in a foreclosure?
The most immediate effect of bankruptcy on a foreclosure is an automatic stay that takes over once you file a bankruptcy petition. The automatic stay stops creditors from trying to collect debts. Accordingly, if your home is being put up for sale, the sale must be postponed until the bankruptcy is pending (anywhere from three to six months), except in the following situations:
- The lender files a motion to “lift” the stay and proceed with the sale.
- Some states have special rules regarding notice of sale that may allow the sale to proceed during your pending bankruptcy.
Generally, yes. In Chapter 13 bankruptcy filings, the debtor’s property remains untouched as he pays back any arrears on the mortgage as part of a three- to five-year repayment plan. You may even be able to eliminate second and/or third mortgages on your property if the current value of your home is enough to secure the first mortgage. Note that bankruptcy doesn’t cancel first mortgages, however.
Because Chapter 13 bankruptcy depends on a debtor’s ability to pay, though, not everyone is eligible to file this type of bankruptcy. Because each situation is different, it is essential that you contact an experienced bankruptcy attorney in your area for advice on how bankruptcy could help with foreclosure on your home.