You have been missing mortgage payments for months, and you know the lender is going to foreclose on your home. That doesn’t make it any easier when the official notices begin to arrive. You desperately look for any option to save your home or at least buy yourself some time to get your finances straightened out so that you can afford the house again.
One potential option is bankruptcy. You may be able to use either Chapter 7 or Chapter 13 to slow the process down.
When you file, an Order for Relief will be given out by the court. This puts an automatic stay on the foreclosure process. The lender cannot continue trying to collect on the loan and repossess the house. Even if the lender has already scheduled a foreclosure sale, it must get postponed. Nothing else in the foreclosure case can proceed.
The reason is that bankruptcy cases take precedence. That foreclosure is not cancelled, but simply put on hold until the bankruptcy case is over. This can often buy you a few months, perhaps three or four. Every case is a bit different, but that’s a standard timeframe.
In this way, bankruptcy can give you the time that you need. An imminent sale is not going to force you out of your home in the next two weeks. With reorganization bankruptcy — Chapter 13 — you may even be able to get all of your debt sorted out so that you have affordable monthly payments.
As you can see, bankruptcy offers you a potential solution during foreclosure, so make sure you know exactly what steps to take.
Source: FindLaw, “Facing Foreclosure? How Bankruptcy Can Help,” accessed May 11, 2018