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Can bankruptcy halt foreclosure proceedings?

Struggling with debt is stressful enough without having to worry about losing your home. However, if you fail to make your mortgage payments, you can expect your lender to begin foreclosure proceedings. Fortunately, you may be able to seek debt relief through bankruptcy protections. Filing for bankruptcy may even give you the time you need to catch up on past due payments, enabling you to keep your home.

The power of the automatic stay

When you file for bankruptcy, the court will issue an order for relief which includes an automatic stay. The automatic stay effectively puts a stop to all collection activities, including foreclosure sales, while you seek court approval of your bankruptcy filing.

This process typically takes a few months to complete, giving you room to breathe while you figure out your next move. However, a lender can file a motion to lift the stay. Always keep in mind that the protection of the automatic stay is not ironclad.

Which bankruptcy option is the best choice?

In general, most people who are successful in keeping their homes file for Chapter 13 bankruptcy. A Chapter 13 filing will put you on an affordable repayment plan over a set number of years. If you're able to keep up on your current mortgage payments while making payments on the past due amounts, you should be able to keep your house after you've come out of bankruptcy.

A Chapter 7 filing will eliminate your unsecured debts. However, most mortgages are secured by the home. Chapter 7 will not cancel a foreclosure. That doesn't mean that this option is without benefits. Even if you end up losing your home, you will still have the opportunity to make a fresh financial start. Over time, you may be able to buy a home again. You should discuss your options with a skilled legal professional to determine which plan is best for you.

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