Bankruptcy and Home Foreclosure
If you are facing a home foreclosure, will filing for bankruptcy save your home?
If you have found yourself in these trying economic times in the position where you've fallen behind in your monthly bills such that you have paid your electic bill (to keep the lights on) and your gas bill (to stay warm in cold Massachusetts winter), but by so doing you've been shorting your mortgage payment, your mortgage lender may be quick to file a foreclosure on your home to recoup their loses. What then can you do? Will filing for bankruptcy be better or worse than foreclosure, and if foreclosure action has been initiated, can filing for bankruptcy stay that action and save your home?
Indeed, upon filing either Chapter 7 or Chapter 13 bankruptcy, an automatic stay commences which immediately stops all debt collection activities against you, including home foreclosure. However, this automatic stay is only temporary in Chapter 7 bankruptcy, and you may still lose your home unless you are able to bring your debt current or negotiate an agreement with your mortgage lender to restructure the mortgage to a loan you can repay.
By filing for Chapter 13 bankruptcy, you are able to put your accumulated debt into a payment plan which you can repay over a three to five year period, possibly at less than the original amount. This would apply if your home is valued less than your paid for it, or if you have unsecured second or third mortgages.
This is the major benefit of filing bankruptcy: you gain time to restructure your financial affairs. You may be able to discharge or reduce your unsecured debts, thus allowing you to maintain payments on property you want to keep.