If you’re facing a foreclosure but want to keep your home you may have heard that bankruptcy is a good way to do just that. Each situation is different, but there are times when a foreclosure can be stopped by a bankruptcy and then there are other situations where a bankruptcy may help your foreclosure situation.
Chapter 7 Bankruptcy and Foreclosure
A Chapter 7 bankruptcy can help save your home from foreclosure if you’re not already in the foreclosure process and if you’re current on your home bills. Basically, a Chapter 7 is good for homeowners who are having a temporary setback or a situational problem (like huge medical bills) that they can’t afford, but with a bit of help they will still be able to pay their mortgage.
As soon as you file for a Chapter 7 bankruptcy the foreclosure process halts until the bankruptcy is finalized, typically it will proceed as scheduled once your bankruptcy is completed, but if you just need a few months to catch up this might do it.
Chapter 13 Bankruptcy and Foreclosure
A Chapter 13 bankruptcy may the better option if you’re looking to protect your home from foreclosure. A Chapter 13 is different than a Chapter 7 where debt is just discharged. In a Chapter 13 your debt is reorganized and prioritized and you are put on a payment plan. If you’re already in the foreclosure process this might be your best option, but if you’re too far in there may be nothing that can be done to save your home.
Speak to a bankruptcy attorney right away as it’s a tricky legal process and there are many legal aspects you’ll have to navigate if you want to save your home from foreclosure by filing bankruptcy.