When a homeowner fails behind on mortgage payments, the lender may look to begin the legal process of getting the house sold so they can receive payment for the loan against it. Homeowners may qualify for other options such as forbearance, in helping to keep the home and stop foreclosure . If other measures have been exhausted by the homeowner, bankruptcy may be sought.
Bankruptcy has helped many homeowners by delaying the foreclosure process and can even save their home. Filing bankruptcy has been known to delay foreclosure for several months which has given homeowners more time to work on a solution that will allow them to maintain their home. Foreclosure proceedings can be affected by bankruptcy but the outcome may depend on which chapter is filed.
Bankruptcy has the automatic stay that goes into effect when either Chapter 13 or Chapter 7 bankruptcy is filed. The automatic stay helps delay or stall foreclosure from proceeding. If the foreclosure process has started, it may postpone proceedings until the bankruptcy is completed. Chapter 13 bankruptcy allows you to restructure outstanding debt so this may allow you to pay on what is owed on the home. If you have a 2nd or 3rd mortgage, Chapter 13 proceedings may have them listed as an unsecured debt since your first mortgage is secured to the value of the home. Filing Chapter 7 may allow you to save money and have debt cancelled that is secured by your home.
When foreclosure proceedings are halted, you have additional time to work out an agreement with your lender. You also have time to save should you decide to give up your home. Questions and concerns should be reviewed with a legal expert.