Can Bankruptcy Stop Foreclosure?

Making the decision to file for bankruptcy is a serious one, and a step that many people put off until they feel they have no other choice. If you’ve fallen behind on your mortgage payments and are now facing foreclosure, bankruptcy may delay your lender’s action. But there are a lot of variables involved, and there’s a good chance that the reprieve bankruptcy provides will only be temporary.

It’s often receiving a notice of foreclosure that drives people to file for bankruptcy. Collection calls and dunning notices are upsetting, and once you file an automatic stay goes into effect that puts a stop to all of those actions and efforts. But the relief provided by the automatic stay does nothing to change your financial situation or your outstanding bills. You’ll need to collect documents and file paperwork with the bankruptcy court to establish the type of bankruptcy you qualify for. Once you’ve established whether you’ll file for Chapter 7 – a liquidation bankruptcy – or for Chapter 13 – a reorganization bankruptcy – you’ll know a lot more about whether you’ll be able to keep your home.

If your financial situation is severe enough that you are unable to pay your debts based on your income, you face the real possibility that your home and other assets will be sold by your creditors. This will mean that the foreclosure can go forward. Alternatively, if you can reorganize and revise your debts under a Chapter 13 bankruptcy, you’ll have the chance to stop the foreclosure under a repayment plan. These plans generally will extend the amount of time you have to pay some of your debts, or lower your interest rate, or offer some other way for you to meet your obligations.

If your goal is to stay in your home, then the most important and helpful step you can take to stop foreclosure is to meet with an experienced bankruptcy attorney. They will review your financial documents and any notices you’ve received from your creditors and provide you with all of the options that are available to you. There may be a chance that your lender will be willing to work with you, as foreclosure is generally not in anybody’s best interest and a step that banks prefer to avoid.

For assistance with addressing your debts, contact us today to set up a time for us to meet.