Question #1 - Will bankruptcy stop a foreclosure on my underwater home?
Answer: Yes, bankruptcy's automatic stay will stop all collections actions by creditors as soon as you file. If a creditor has filed a foreclosure against your home, even if it has an underwater mortgage, the creditor must stop all foreclosure proceedings once the bankruptcy is filed by the debtor.
Question #2 - How much time do I have once I file bankruptcy to settle my mortgage with the lender or to surrender the home?
Answer: The amount of time a debtor has after filing bankruptcy to settle their foreclosure with the lender or to return the property to the lender will depend on many factors. Sometimes a debtor may have a couple of months or even longer depending on the complexity of their bankruptcy case, how long the bankruptcy lasts and what actions the creditor decides to take while the debtor is in bankruptcy. Sometimes, if the creditor feels that they can sell the home and they don't believe the debtor intends to remain, they will ask the bankruptcy judge to life the automatic stay so that they can proceed with the foreclosure. This doesn't happen often, and the bankruptcy judge's approval is not automatic.
Question # 3 - Do I have to sign a reaffirmation agreement if I decide to keep my home after bankruptcy?
Answer: You are not required by law to sign a reaffirmation agreement to keep your home. A matter of fact, many bankruptcy attorneys will advise against signing an affirmation agreement on a home that is underwater. Remember, when you reaffirm a debt, any debt, that means that you are required to repay it after bankruptcy as if you never filed bankruptcy. And if you fail to keep up payments on your underwater mortgage after bankruptcy and after signing a reaffirmation agreement, the lender will legally have a right to foreclose AND go after you for the balance of the mortgage.