How can I use bankruptcy to try to stop a foreclosure?

An impending foreclosure can be stressful and scary. And, often, it seems like the only way out of debt. But, there are other methods to pay off your dues. Bankruptcy may be an option not only to start fresh but also to save your home.

Foreclosures often take several months. Thus, it gives homeowners some time to assess their options. One of the more successful options is to declare Chapter 13 or Chapter 7 bankruptcy. It forces creditors to stop collecting. It will also postpone the foreclosure until the court finalizes the bankruptcy.

Declaring Chapter 13 bankruptcy lets you set up a payment plan that allows you to pay off your debt. But, keep in mind that you will need enough money to pay off both your debt and regular mortgage payments. Chapter 13 bankruptcy can remove second or third mortgage payments as well.

Chapter 7 bankruptcy eliminates debt attached to the home, such as mortgages. It also forgives tax liabilities for losses that the lender takes on due to the homeowner’s default. For this to apply, the owner must have used loans given by the lender for home payments or improvements.

There are some other things to note about Chapter 7 bankruptcy. First, it does not guarantee that you will keep your home. Also, the court may force you to give up some of your more valuable possessions to pay your debt. And, you may be ineligible for some of these laws due to your income levels.

But there are still some ways in which creditors can counter these measures. One is if the lender files to lift the stay. Lifting the stay is when a lender asks the bankruptcy court to proceed with the sale. If they are successful, then you may not get as much time as you could have. You may still have approximately two months or more, though. It depends on when the lender begins the process.

Although bankruptcy is a scary prospect, it is often better than foreclosure. Foreclosure is a permanent stain on your credit. But, bankruptcy allows you to start fresh. If you are currently facing the possibility of bankruptcy, it may be helpful to contact a lawyer with experience in foreclosure. They can take you through your options and may help save your home.