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If you're facing foreclosure, bankruptcy might help. In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, you can catch up on overdue payments over time using Chapter 13 bankruptcy.
Chapter 7 bankruptcy will eliminate or "discharge" your mortgage balance, utility bills, HOA fees, and other qualifying debts owed as of the filing date. Also, if the filing stops the foreclosure sale, you'll have more time in the home.
A foreclosure affects only the home while a bankruptcy affects all debts. There are different kinds of bankruptcy filings — a Chapter 7 bankruptcy covers all unsecured debt, meaning that individuals can emerge from it with no debts except a mortgage, car payments, student loans and unpaid child support.
A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
Should I file bankruptcy before or after the foreclosure? Answer. You'll most likely gain more if you file for bankruptcy before your home is foreclosed. For one thing, you'll prevent the lender from getting a deficiency judgment if one is allowed in your situation.
Many debtors turn to bankruptcy when facing foreclosure, and with good reason. Filing for bankruptcy allows a debtor to take advantage of protection known as the automatic stay. The stay works by stopping creditors' attempts to collect debts or enforce liens during the bankruptcy case.
1. Who Initiates the Case. In bankruptcy cases, you start the process by filing a bankruptcy petition. In foreclosure, the lender is the one who initiates the proceeding to repossess and sell the property.
In a Chapter 13 bankruptcy, you can pay off the late payments over the length of the repayment plan, as long as you continue to meet your current mortgage payments as well. If you make timely payments under your Chapter 13 debt repayment plan, you can avoid foreclosure. Why Chapter 13?
In a Nutshell. Filing for bankruptcy can help homeowners to prevent foreclosure. Most of the time, filing for Chapter 13 bankruptcy is most effective at preventing foreclosure, as it allows homeowners to repay their overdue mortgage debt over a 3-5 year period of time. Written by Attorney Todd Carney. Updated August 1, 2023. Table of Contents.
Updated 7/27/2022. If you're in foreclosure and thinking about filing for bankruptcy, you probably have a lot of questions. You might be wondering: Will bankruptcy help me keep my home? Do I still have to make mortgage payments after I file for bankruptcy? Will my lender be able to foreclose even after I file for bankruptcy?