Can Filing Bankruptcy Stop a Foreclosure?

Yes, filing for bankruptcy will stop the foreclosure, at least temporarily. Depending on your particular financial situation, you may be able to use the bankruptcy laws to "cure" your delinquent mortgage payments and stay in the house indefinitely. If you have sufficient income, a chapter 13 bankruptcy plan offers excellent solutions for homeowners facing foreclosure.

First, the Automatic Stay

Irrespective of the type of bankruptcy for which you file, once the petition has been filed with the court, all creditors, including your mortgage lender, will be barred from bringing any lawsuits or otherwise attempting to collect money from you. A foreclosure is a type of lawsuit, and it will be stopped automatically by the bankruptcy process.

Now, your lender may try to argue that the automatic stay should be lifted, but unless they have an exceptionally good argument, your lawyer will be able to shut them down.

So, in the short-term, you will be able to stay in the home.

Now, Getting Caught Up with Chapter 13

During the few months that the bankruptcy process will take, you will be afforded the right to stay in your home and save money that would otherwise go towards your mortgage. During this time, you can take a realistic assessment of your financial situation and determine if you can honestly afford to keep the home.

Chapter 13 bankruptcy offers you a unique way to use the bankruptcy court to force the lender to modify the loan into something your family can afford. There are specific laws and legal strategies designed to get homeowner who've become past due a chance to "cure" these delinquent payments over time. This means, as part of your repayment plan, your attorney will work out a reasonable monthly payment to get caught up on all past due mortgage payments.

Free Up Cash by Eliminating Unsecured Debt

Another advantage of bankruptcy, whether chapter 13 or chapter 7, is that most unsecured debts, such as credit card and personal loan will be discharged, so you won't have to worry about making those monthly payments. This will free up your income to stay on top of your mortgage payments and other important monthly bills.

What to Expect in a Repayment Plan

The US Bankruptcy Court looks very favorably on debtors that choose to file chapter 13, and will work with you to get your remaining secured creditors to accept a monthly payment that your income will reasonably allow. Your lawyer will work to make sure the plan you end up with is something that will be comfortable for you and your family to maintain, so as to keep you out of financial trouble in the future.

If you think bankruptcy might be an option for you, talk to a bankruptcy lawyer now to get some advice regarding a legal strategy that can save your home, you car and other important assets while getting rid of unsecured debt so you can get back on your feet again.

Good Luck