How Can Bankruptcy Stop Foreclosure?

The recession that hit us hard in last couple of years has left many out there jobless, or to a lesser extent, with lower wages and salaries. And when your source of income is affected, you tend to struggle to stick to your payment schedules, especially for large payments such as your monthly loan payment for your home! Missing your mortgage payment for a few consecutive months would leave you vulnerable to the risk of being exposed to foreclosure proceedings, especially if your creditor is eager to recover his losses by selling your home to someone who is willing to buy it as soon as possible! If you are caught in such a situation, what can you do to stop foreclosure?

There are many methods and solutions available to homeowners today that seek to put an end to foreclosure proceedings. For one, you could try negotiating with your creditors to delay foreclosure until you get your finances in place, probably with the aid of a hardship letter. Or you could try to refinance your home by making use of the government’s foreclosure assistance! If any of these solutions do not work, then you could, as a last resort, opt for the most drastic move of them all, bankruptcy! File for either Chapter 7 or Chapter 13 Bankruptcy now, and forget about mortgage debts ever again!

Do not fall into the delusion that you would be able to save your home through filing for bankruptcy. The truth is you would not be able to salvage your home, but you can definitely stop foreclosure once you file for bankruptcy, and get your lenders off your back for good! Not only will you eliminate all your current debts, you can also make sure that your creditors do not have the capability of suing you for missed payments in the future after you are declared bankrupt. Nevertheless keep in mind that bankruptcy should only be taken into serious consideration once all other ways of stopping foreclosure has been exhausted, as it has serious implications on your financial stability, especially for the long run! Once you are declared bankrupt, you would struggle to get approval for future loans and credit cards, and even have difficulties when you apply for future employments.

So can bankruptcy stop foreclosure? Most definitely yes, but only if you know how the concept of bankruptcy works, and you utilize decent bankruptcy lawyers to help you out with your case.

Can Bankruptcy Stop Foreclosure?

Many people that find themselves filing for bankruptcy are often in the middle of losing there homes in foreclosure proceedings. Saving one’s home by filing bankruptcy can be tricky, depending on the circumstances, however, it is possible.

Identification
Filing bankruptcy, is a request for the court to forgive debts and allows for “room” in order to pay off creditors. Personal bankruptcies are filed under chapter 7 or chapter 13 of the Federal Rules of Bankruptcy Code. These laws are tailored to serve people with different sets of circumstances. However, they are also specifically defined. While both chapter 7 and chapter 13 result in protection from the court, they differ in several areas. In regards to foreclosure, both Chapter 7 and 13 filings are treated relatively the same during the initial stages of the process.

Types
It is commonly thought that a chapter 7 always means a court forgives the debts of those seeking protection. However, in this type of bankruptcy, the court determines which assets a person may have that could be liquidated to pay her creditors. This includes equity in real estate. If a client has no non-exempt assets to be liquidated, the court would then make a decision whether to discharge debts included in his petition for protection. A chapter 7 bankruptcy is also known as a “liquidation” plan.
Debtors filing for bankruptcy under chapter 13 are treated differently by the courts. Under chapter 13, each debtor proposes a creditor repayment plan to the court. The court decides if this plan is acceptable and a three or five-year repayment plan is commenced. Bankruptcies falling under the chapter 13 law are sometimes called debt “reorganization” or “repayment” plans.

Features
In the beginning stages of both chapter 7 and chapter 13 bankruptcy, the court will issue an automatic “stay” in all collection activities. This court action will also stall a foreclosure for several weeks to a few months, depending on when the foreclosure was initiated. During this period, creditors, by law, must cease their attempts to collect unpaid debts until either the court discharges a bankruptcy or until the stay is lifted. It is also possible, however, for creditors to file motions to have any stays lifted before the court decides to do so. The purpose of a stay is to give the debtor time to gather pertinent the financial information they wish to include in their bankruptcy petition. This will also give a homeowner time to decide whether to keep their home.

Misconceptions

Although an automatic stay is usually issued in both a chapter 7 or chapter 13 bankruptcy and will stall a foreclosure, it does not guarantee a debtor that will keep their homes. With chapter 7 bankruptcies, creditors, especially home lenders, are usually able to continue collecting unpaid debts after stays are lifted and bankruptcies are discharged. This means that a foreclosure may proceed, as initiated, after a bankruptcy is complete,which means that a homeowner will still lose their house. In chapter 13 bankruptcies, foreclosures are usually stopped if the debtor agrees to make up missed payments as part of the repayment plan and make regular payments on time thereafter. It is also common for automatic stays to remain in place for the life of a chapter 13 repayment plan. Chapter 13, therefore, is the best option for stopping foreclosure.

Considerations
Stopping foreclosure by filing bankruptcy is something that could also be quite tricky, depending on the laws of each state. There are many variables that could, in some cases, make the process a bit more complicated than desired. An experienced bankruptcy attorney should be consulted. Most bankruptcy lawyers provide free consultation and advise, based given circumstances, which bankruptcy plan is right for each client. He or she will also prepare the necessary forms need to file bankruptcy petitions and assist homeowners in dealing home lenders that have already initiated the foreclosure process.

About the author:
By Jim Hagerty, eHow Contributor
Read more: Can Bankruptcy Stop Foreclosure? | eHow.com

Chapter 13 Bankruptcy Stop Foreclosure : Does Bankruptcy Stop Foreclosure

If you are facing foreclosure, you may have tried a variety of strategies that could allow you to stay in your home, such as a workout with your mortgage company, or even a federal program such as the Home Affordable Modification Program. But nothing has helped and you are falling further behind in your mortgage payments. Can declaring bankruptcy be the answer? Can bankruptcy stop foreclosure and allow you to keep your primary residence?

Chapter 13 Bankruptcy

Bankruptcy is a federal court process providing individuals or businesses the opportunity to either eliminate their debts or repay them. There are two most common types of bankruptcy. Under a Chapter 7 bankruptcy, the bankruptcy court wipes out or discharges the debts you owe, but you will probably lose your house. Under a Chapter 13 bankruptcy, you can usually keep some of your property, including your primary residence, but you are required to follow a payment plan to repay at least part of your debts to your creditors.

Chapter 13 bankruptcy can give you the opportunity to rearrange your financial affairs, start paying off your debts, and bankruptcy can forestall foreclosure of your home. The bankruptcy petition must be filed before the sale date of your property, and you must create a plan to make your mortgage payments. Under the operation of law, if you can pay your regular mortgage payments they must be accepted by your mortgage company.

Chapter 13 stops the house foreclosure process; it stops interest accruing on personal debt, including most back taxes; and through something called the “automatic stay” it stops all collection activity. Under a court-approved Chapter 13 plan, you are required to make monthly payments to a court-appointed bankruptcy trustee for a period of three to five years. The bankruptcy trustee is responsible for paying the money to your creditors.

Is Bankruptcy Easy? No!

The legal system is complex, and your creditors will have aggressive legal counsel to challenge you at every stage of the process. You need qualified legal counsel to guide you through the procedure.

Can bankruptcy stop a foreclosure? It can at least delay it. Your home is probably secured by a deed of trust, and your mortgage company is entitled to petition the court for relief from the automatic stay. To keep your home you will have to make an agreement with your mortgage company to repay the past due amount. The question you need to ask yourself-and answer to the satisfaction of the court and your mortgage company-is if you could not pay your mortgage last month, how can you expect to pay your mortgage next month?

You may have heard of the “homestead exemption” that allows you to keep your house. According to federal law, protection for a homestead is limited to $125,000 if the property was acquired within the previous 1,215 days (3.3 years). Restrictions are complex and vary by state; this is another good reason to consult a qualified attorney.

Chapter 13 bankruptcy may buy you some time but you will not automatically get to keep your home. You will have to negotiate with your mortgage holder.

Consider the advantages of filing bankruptcy in order to keep your home:

• Foreclosure proceedings are temporarily suspended.

Consider the disadvantages of filing bankruptcy solely to stop foreclosure:

• For ten years there will be a bankruptcy on your credit record.
• Your mortgage company can petition the court and still foreclose.
• You will lose your negotiating position.
• You will still have to repay past due amounts to your mortgage company.
• You need to make every payment to the court-appointed trustee. If you are even one day late your case may be dismissed and your mortgage company may foreclose.

Before you consider filing Chapter 13 bankruptcy in order to save your home, think carefully about the alternatives (including selling your home) and get good legal advice.

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