Stopping Home Foreclosure with Bankruptcy

Foreclosure can be a traumatizing experience. After all, people save and work their whole lives to own their own home. Losing a property because of economic hardship can kill a person. When a person cannot keep up with his or her mortgage payments, a bank may try to take back the home to sell it. However, all is not lost. Filing for Chapter 7 or Chapter 13 Bankruptcy can actually save a person’s home and can stop foreclosure proceedings. The following includes some basic information about how this works.

Chapter 7 Bankruptcy

When a person files for Chapter 7, they are asking the court to wipe out his or her debts completely. However, the court one files in may have the option to sell off some of the property to pay off creditors. Still, one may be able to reorganize their debts so that they can then start paying their monthly mortgage payments and can then keep their home. Once a person files for Chapter 7, the foreclosure proceedings will be stopped for a certain number of months. This could give an individual the time he or she needs to get back on track with bills. In fact, whenever you file for Chapter 7 or Chapter 13 bankruptcy, the court issues an Order for Relief, which means that creditors have to stop collection activities.

There is a limit to how much equity you can have in your home, which will determine if you can keep it in a Chapter 7 bankruptcy, or whether the house will be liquidated by the court, so Chapter 7 may not be a good option, to stop foreclosure, for those with allot of equity built up in their home.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy gives people a three to five year period to pay off their debts. After this time, debts are then wiped out. This type of filing was designed to help people stop foreclosure. Once a person files for Chapter 13, there will be an automatic stay that gives people the time to work out a compromise with the bank. This will also give an individual the time they need to work out their bills and debts. To file this time of bankruptcy, one needs to have a steady income to work with.

Each type of bankruptcy gives the homeowner some breathing room when working out their debts. By communicating with lenders, working hard, and taking advantage of the automatic stay or relief from creditors, people can get back on their feet and can keep their home.

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