You may have had someone tell you that you can stop foreclosure by declaring bankruptcy. If you get the notification from the lender that they’re going to foreclose on your home, all you have to do is file for Chapter 7 bankruptcy. You may have to liquidate some non-exempt assets, but you likely won’t lose too much. This process can then eliminate some of your remaining debt.
If you are facing foreclosure, this may sound too good to be true. Is filing for bankruptcy all you have to do to stop the process and save your home? Can this really work?
It does delay the foreclosure process
Bankruptcy does initially stop the foreclosure from moving forward. It does this by creating an automatic stay, which is a legal requirement that the foreclosure case has to wait until the bankruptcy case has concluded. So you can think of this as putting the foreclosure on hold.
But it doesn’t stop that foreclosure entirely. Once the bankruptcy has concluded, the automatic stay is lifted and the lender can take the home.
As such, you need to focus on your overall goals when working through bankruptcy. You may find ways to eliminate the debts that you have so that your mortgage payments become affordable again. You may even be able to get caught up on back payments or set up a repayment plan – such as using Chapter 13 bankruptcy. These steps could be what actually prevents the foreclosure from occurring.
Exploring your options
As you can see, there are many different options when you’re facing financial troubles. Be sure you know how they work together and what legal steps to take.
