Keep Your Home: Bankruptcy and Foreclosure

If you are facing foreclosure, like millions of other Americans, you may be considering bankruptcy.  Arguably, bankruptcy is the best option to stop a foreclosure for any homeowner who wishes to keep his or her home, but cannot qualify for a loan modification or refinance. 

Benefits of Filing Bankruptcy

Bankruptcy has a number of benefits which make it a better option than foreclosure rescue assistance and other foreclosure prevention options you may be considering. 

• The Automatic Stay – One of the biggest benefits of filing bankruptcy is the automatic stay.  The automatic stay is an injunction which becomes effective the moment you file bankruptcy and prevents your creditors from making collection efforts against you or your property.  The automatic stay actually stops your mortgage company from foreclosing. 
• Catch up on Mortgage Payments – When you file a Chapter 13 bankruptcy, you’ll have an opportunity to bring your mortgage payments current over time without the stress of dealing with constant pressure from your lender. 
• Eliminate or Reduce Certain Unsecured Debts – Filing bankruptcy allows you to eliminate or reduced unsecured debts, such as credit card bills and medical bills.  This can free up cash which you can use to make your mortgage payments. 
• Reduce the Balance Owed on Certain Car Loans – If you file a Chapter 13 case, you may be able to reduce the amount you owe on your car loan to the present value of the vehicle.  This will leave more cash available for you to make your mortgage payments. 

• Strip off Junior Mortgages – If you file a Chapter 13 case and have one or more junior mortgages which are wholly unsecured, you may be able to utilize strip off.  If the court allows the junior mortgages to be stripped off, they will be treated as unsecured debts in your bankruptcy case. 

Chapter 7 vs. Chapter 13

Chapter 13 is a better option than Chapter 7 if you are facing foreclosure and wish to keep your home.  If you file a Chapter 13 case, you will be required to make your post-petition mortgage payments on time each month until your case is discharged.  The mortgage arrearage will be paid through your Chapter 13 plan. 

Getting Legal Help

If you are facing foreclosure and have questions about how filing bankruptcy case be used to stop it, you should speak with an experienced bankruptcy attorney.  A bankruptcy attorney will review your case and advise you of whether bankruptcy is the best option to save your home from foreclosure.