When a household is experiencing serious financial issues, one of the main concerns is often losing the home. When homeowners fall behind on mortgage payments, they can have difficulty ever catching up, and they risk defaulting and facing foreclosure. Many people who are exploring the possibility of bankruptcy have active foreclosure cases, and they are looking for ways to stop the action by their mortgage lenders.
So, a common question is, can bankruptcy stop a foreclosure and allow you to keep your home? The answer to this question will depend on your specific circumstances, but bankruptcy has been a successful mechanism to avoid foreclosure for many households.
The Automatic Stay
When you file for bankruptcy, a court order called the automatic stay will go into effect. This stay halts all collection efforts of your debts, including legal actions such as foreclosures. If you have an active foreclosure case, it will pause immediately, and possibly until the resolution of your bankruptcy case. This gives you time to catch up on your mortgage while you do not have your other debt obligations. Sometimes, mortgage lenders will petition the court to lift the stay for the foreclosure, so you have to be prepared for this possibility.
If you are behind on your mortgage due to other debt obligations, Chapter 7 bankruptcy can eliminate other obligations fairly quickly. This can often free up enough cash to become current on your mortgage in time to prevent foreclosure.
A Chapter 13 repayment plan will not eliminate your mortgage, but it can include your mortgage arrears in your repayment plan. As long as you can stay on time for current payments, you can eliminate arrears through Chapter 13 bankruptcy, which can often avoid foreclosure.
Consult with a Bankruptcy Lawyer in Memphis for More Information
There is no guarantee that bankruptcy will prevent foreclosure, but it commonly does so. The Hurst Law Firm, P.A. can advise you of the best options for your situation, so please call 901.725.1000 or contact us online today for free.