If you are facing foreclosure, you are likely looking for options to address the issue. You do not want to lose your home, but you can’t deny that you have missed some of your mortgage payments, leading to the start of the foreclosure process.
In some ways, bankruptcy can actually be beneficial. Let’s consider how this could help as you try to avoid a foreclosure.
The automatic stay
To begin with, remember that bankruptcy cases create an automatic stay for other legal collection efforts and cases against you. These are not allowed to proceed until the bankruptcy has finished.
So, if the lender has already filed for foreclosure, that case is essentially put on pause during the bankruptcy. If bankruptcy takes you a few months to work your way through the process, this does buy you extra time in your home.
Re-organizing your budget
But the automatic stay will eventually be lifted, so the foreclosure can move forward again. That’s why it’s important to use bankruptcy to re-organize your budget and get yourself in a better financial position.
For instance, maybe some of your other debts were eliminated through Chapter 7 bankruptcy, or perhaps your debts were consolidated using a Chapter 13 plan. Either way, this reduces some of the financial strain on your budget. That may create enough space that you can get current on your mortgage payments again, and then your lender won’t have to foreclose even after the automatic stay is lifted.
As you can see, bankruptcy is one useful tool to consider. Take the time to carefully look into all of your legal options.