As the housing market continues to crumble, millions are facing the unfortunate prospect of losing their homes. The question for many is whether bankruptcy will stop a home foreclosure?
Millions of people are having problems with their homes these days. Getting behind on payments is unfortunately fairly common. If this happens, your first step should not be to file bankruptcy. Instead, you should contact your lender. The last thing banks need now is another bad loan on the books. This means they are motivated to deal with you. They may change your terms, slice off a chunk of the amount you owe or take some other helpful steps. They will have no choice but to foreclose if you do nothing. Pick up the phone!
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What if things just can't be saved? What if foreclosure is just days away? Can bankruptcy provide a halt to it? Yes, but there are limits. The filing of a bankruptcy petition creates an "automatic stay". This legal event means exactly what it suggests. Any actions against you are frozen. This includes foreclosure proceedings, which is your goal. This being said, the freeze does not last forever.
The automatic stay can usually buy you three to four months before the foreclosure proceeding will be allowed to proceed. The lender may not be willing to wait that long. To speed things along, it may file a motion for relief from the stay. If the court agrees to allow the sale, you will usually only have a few weeks before it happens.
A Chapter 13 bankruptcy filing is unique in that it is a reorganization of personal finances, not a liquidation. This technical explanation can actually create a loophole you can use to keep your home out of the clutches of foreclosure. The reorganization of your finances is such that certain debts are cut off while others are repaid over three to five years. If you have income from a job, you can actually take your overdue mortgage payments, penalties and interest and repay them over the next five years. This technically takes the mortgage out of default, which prohibits the lender from foreclosing on the property. This is a tricky strategy and should only be undertaken with the help of a bankruptcy lawyer who is familiar with it.
Can filing bankruptcy stop your foreclosure proceeding? Yes, but it really only buys you time. You still need to come up with a plan to deal with the debt or you will eventually lose your home.
Is Bankruptcy Right For You? Talk to Bankruptcy Attorneys Free and Confidential. Licensed bankruptcy attorneys are available. Attorneys will call you to discuss your case for free. Find out if bankruptcy is right for your situation.
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