Stop Foreclosure: FILE FOR BANKRUPTCY

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Your lender gave you a mortgage when you took out your home loan. So if you fail to pay your loan according to the terms of the mortgage, the lender has the right to start the foreclosure proceedings. One of the ways to avoid or delay the foreclosure of your home is by seeking bankruptcy protection. Bankruptcy may help if you are facing foreclosure and cannot work out a deal or any other alternative with your lender.

The foreclosure process as I have already discussed in my past posts doesn’t happen overnight. The process typically starts after you fall behind on your payments for at least two months. So that gives you time to try some other measures like reinstatement, forbearance, selling the home to a cash buyer or a short sale. But if you have tried and failed with these other measures then now is a good time to consider bankruptcy as a possibility for stalling or avoiding foreclosure.

The court automatically issues an order called the Order of Relief when you file a Chapter 13 or Chapter 7 bankruptcy, which includes the automatic stay. The automatic stay directs your creditors to cease their collection activities immediately, no excuses. So if your home is scheduled for a foreclosure sale then the sale will be legally postponed while the bankruptcy is pending – which is for like three to four months.

• Chapter 13 bankruptcy lets you pay off the arrearage over the length of a repayment plan you propose which is five years in some cases. But you will need enough income to at least meet your current mortgage payment while at the same time paying off the arrearage. But you will get to keep your home assuming you make all the required payments up to the end of the repayment plan.

• Chapter 7 bankruptcy will stall the sale and give you time of like two or three months to work things out with your lender – if you really have to give up your home no matter what. It will also help you save up some money during the process and cancel the debt secured by your home.

Thus, bankruptcy is a solution to foreclosure that most homeowners should examine with a trusted lawyer, even if it’s just to have a last effort to stop the foreclosure of their homes. Homeowners facing foreclosure need to be aware of the implications of filing bankruptcy and do their best to avoid being taken advantage. But despite of its complexity, filing bankruptcy may give homeowners one last chance to put the foreclosure process on hold long enough to find a more reasonable solution.