Does Bankruptcy Prevent Home Foreclosure?
Are you afraid your home is going to be foreclosed? Have you wondered if filing for bankruptcy would prevent that from happening? The answer is…maybe. It depends on your income and the type of bankruptcy you are considering filing. Here’s how it works.
Chapter 7 and Foreclosure
Chapter 7 bankruptcies eliminate almost all unsecured debts, but your mortgage does not fall into that category. Your home is the security for that debt. If you have fallen at least three mortgage payments behind, your mortgage company may initiate foreclosure procedures.
When you file for Chapter 7 bankruptcy, the court will issue an automatic stay which halts all collection actions, including foreclosure. This is a temporary action, however. Unsecured creditors will be permanently barred from making any further collection attempts, but your mortgage company will eventually be allowed to continue with the foreclosure process unless you are able to catch up the missed payments and penalties. If you are unable to bring your mortgage current, or do not have the means to make future payments, the foreclosure will continue.
Filing Chapter 7 will buy you a little extra time in your home, giving you a better opportunity to plan for the future. Or, if you are able to pay off the arrears, you will be allowed to keep your home as long as you can keep the payments current.
Chapter 13 and Foreclosure
If you do have a steady source of income, you may want to consider filing Chapter 13 bankruptcy rather than Chapter 7. This is often the better option if you want to keep your home. Chapter 13 bankruptcies allow debtors a little breathing room to catch up on late payments and keeps creditors from hassling them while they do so.
Chapter 13 bankruptcy does stop foreclosure proceedings, but you must be prepared to meet the court ordered, budget-based payment schedule they help you create. This plan will allow you to make payments over a period of time and get you back on an even keel with your mortgage company.
It is important, however, that you make the scheduled payments on time. If you fall behind, the mortgage company can request that the stay be lifted and if is, foreclosure may take place.
Talk to your Chicago bankruptcy attorney about which option is best for your personal circumstances. Deciding to file for bankruptcy is a big step, but it may be the best opportunity you have to save your home and get a new financial start. A Chicago bankruptcy lawyer will be able to answer all of your bankruptcy questions and many attorneys offer a free consultation to discuss your situation.
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Tagged With Bankruptcy, Chapter 13, Chapter 7, foreclosure
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