Foreclosure generally begins after a homeowner falls behind on mortgage payments. The lender then begins the process of selling the home by auction to get payment for the loan. The foreclosure process does not typically begin until the homeowner has missed several payments, often three or four, which gives time to try other methods. If these methods have failed however, bankruptcy is a good solution to consider for stalling foreclosure.
When filing for bankruptcy, the Automatic Stay can be a great help in postponing foreclosure. This is available for both Chapter 7 and Chapter 13 bankruptcies. If your home is scheduled for foreclosure, the foreclosure will be legally postponed while the bankruptcy is pending. There are however exceptions to this rule. These exceptions include a motion to lift the stay, which entails the lender obtaining the bankruptcy court’s permission to proceed with the sale or foreclosure. These exceptions and protections from foreclosure are dependent on each state’s bankruptcy laws.
Chapter 13 is generally the chapter that individuals file bankruptcy under in order to stop foreclosure because they are overdue income or property taxes or they have too much income for their family size to qualify for chapter 7.
Chapter 13 bankruptcy can help you save your house by:
- giving you more time to catch up on missed payments,
- allowing you to contest the legality of the foreclosure,
- allowing you to get rid of liens on your home,
- as well as it can make your mortgage debts more affordable long-term by reducing your overall debt.
Chapter 13 is the ideal bankruptcy solution for foreclosure, as it more efficiently reduces your debts and postpones foreclosure.
You can save your house through Chapter 7 bankruptcy if you are keeping up with your mortgage payments when you file, and your equity in the house is adequately protected by the exemption laws in your state. Chapter 7 bankruptcy will give you three or four months extra time, depending on how aggressively your lender pushes for foreclosure. Unless the judge gives the lender permission, no foreclosure sale can take place during this period.