Can a bankruptcy filing stop the foreclosure of your home?

| Jan 27, 2021 | Uncategorized |

It only takes one illness or injury to leave you out of work and unable to pay your monthly expenses. Falling behind on your mortgage can put all of the investments you have made in your home at risk. Depending on the terms of your mortgage and your lender’s policies, you could face foreclosure after a single missed payment.

If the lender forecloses on you, you won’t just lose out on your place of residence. You will also lose all of the equity you have built up and the value of the improvement be made to the property. Obviously, defending your home against foreclosure is crucial to your future financial stability.

If you have received a foreclosure notice from the lender or if you believe one is on its way soon because of missed payments, could filing for personal bankruptcy help you keep your home?

After you file, creditors have to cease collection efforts

One of the most important ways that bankruptcy helps those struggling with debt is by protecting them from collection efforts until the courts resolve their filing. The automatic stay takes effect the same day that you file for bankruptcy. You won’t have to worry about creditor lawsuits, collection calls at your house or the repossession of property for at least a little while.

If the courts dismiss your bankruptcy filing or if your creditors file a successful adversarial proceeding asking to be able to continue collecting on the debt, creditors can then resume collection activity, potentially including foreclosure.

Bankruptcy gives you an opportunity to negotiate your mortgage

Some mortgage lenders are willing to work with homeowners going through financial hardship, while others need some kind of motivation to help the people that hold their mortgages.

If your lender hasn’t agreed to cooperate with you, filing bankruptcy might give you more leverage during those discussions. Chapter 13 bankruptcy, in particular, can help in restructuring your debt. Lenders are often more receptive to negotiating terms when they know the courts will oversee the process.

If you worry about potentially losing your home to foreclosure in the near future, bankruptcy could potentially help you save your home and free up more money in your budget so that you don’t miss your mortgage payment again.