Can Foreclosure Be Stopped Through Bankruptcy?

  • Foreclosure

Can Foreclosure Be Stopped Through Bankruptcy?

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When you are drowning in debts and are on the brink of losing your home to foreclosure, then bankruptcy might be the best way to not only save your home but also get rid of your debts say Dallas based bankruptcy law firm Recovery Law Group lawyers.

People often take a mortgage for buying a house; however, there may be circumstances when people are unable to keep up with mortgage payments. When homeowners are unable to pay their mortgage for a long time, the mortgage lender might initiate legal proceedings against the homeowner in the court by obtaining Judgement of Foreclosure. With this judgment, the lender can initiate proceedings for the public selling of your home.

Generally, the foreclosure process is not initiated unless you have missed several payments on your mortgage. In the meanwhile, you can try various other alternative methods to avoid foreclosure like a loan modification, short selling the house, loan forbearance plan, or get a deed in lieu of foreclosure. If these techniques do not work, then you can opt for bankruptcy.

For bankruptcy filers who wish to get rid of their mortgage debt, chapter 7 is the best option. In this case, liquidation of assets takes place to get rid of your debts. To be able to qualify for this bankruptcy chapter, your income must be lower than the state median. However, if you wish to save your home or if your income is higher (making you ineligible for chapter 7 bankruptcy), you can opt for chapter 13 bankruptcy. Through this chapter, you can even catch up on past mortgage payments and bring them up to current. The plan lasts for 3-5 years and has the option for mortgage mediation where your monthly mortgage payments could be lowered.

Automatic stay

Filing of bankruptcy (chapter 7 or chapter 13) results in automatic stay! This order results in stopping all collection actions by creditors including foreclosure. In fact, the automatic stay can even postpone home sale if bankruptcy is pending (for 4 months or longer). However, if the lender files a Motion for Relief from Stay and wins it, then postponing of sale can be canceled. With this motion, the lender has the court’s permission to go ahead with debt collection. Good news for debtors is that despite this motion, the court can still postpone house sales, albeit for a short time only.

In case you are bogged down by debt and are considering bankruptcy

filing, you need to be aware of the extent of homestead exemption available in your state. You can ask experienced bankruptcy lawyers at 888-297-6023 about which properties and of how much equity can they protect with the provided exemptions.