Most of us have been taught to avoid a bankruptcy at all costs, heard that it ruins your credit and can stay on your credit report for many years. But if you’re behind in your bills, including your mortgage payment and your mortgage lender is threatening you with foreclosure, a bankruptcy may just be your best solution to preventing foreclosure and keeping your home!
The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13 bankruptcies. In many cases, filing for Chapter 7 bankruptcy will not save your home, but will delay the foreclosure process for several months, giving you the time you need to find your family a new place to live. Once you file for bankruptcy, the lender cannot proceed with the foreclosure, which gives you several months in your home where you’ll owe no mortgage payment and be living essentially for free. A Chapter 7 bankruptcy will also cancel out your debts, including the mortgage (and any second mortgage or home equity loans you may have). If you are looking to “start over” due to a change in your financial circumstances, a Chapter 7 bankruptcy may be in your best interest.
If you file for Chapter 13 bankruptcy, you may be able to hold onto your home. The way a Chapter 13 bankruptcy works to prevent foreclosure is that this form of bankruptcy lets you pay off all your late, unpaid payments over a length of time determined by you, your lender and the courts – which can be up to 5 years. You’ll need to provide proof of income to support this new repayment plan; however, which is tricky for some homeowners who have been faced with layoffs or hour reductions. You’ll also need to keep current with the new payment plan, or else your lender may again begin foreclosure proceedings. If you have run into financial difficulties but would like to try to keep your home, call our office today to speak to an attorney about whether a Chapter 13 bankruptcy filing may work to prevent foreclosure for you.