If your home is threatened by foreclosure, it may be possible to protect it by filing for bankruptcy. A Chapter 7 ‘liquidation’ bankruptcy will not remove or eliminate any mortgage or HELOC debts that are “secured” by the home. You can’t wipe out this secured debt like you can credit card debt (there are ways to ask the court to reduce it under a Chapter 13 ‘repayment plan’ bankruptcy). However, while a bankruptcy is in progress, creditors are automatically prevented from foreclosing on your home.
What are some of the benefits of filing Chapter 7 bankruptcy when facing foreclosure?
- Cash – eliminating unsecured debts like credit cards, or giving back cars, boats and expensive financed toys can free up money to allow you to begin making mortgage payments again.
- Time – you can benefit from the automatic stay by having more time in your home to put together funds to move and rent a new residence. Many families get buried under their expenses and then can’t even afford to move out or pay deposits for a rental, so a bankruptcy can help stop most or all creditor payments and give you a few months to get some money together.
- Relief – the creditor calls and threatening letters, visits from process servers and constables cause severe stress and can affect your health and mental well-being. The stay period during a bankruptcy, where creditors are only allowed to communicate to your attorney and not you directly, is often a great mental relief and can allow you to sit down and plan calmly and more peacefully about your future and getting back on track financially.
- Maybe Start Making Payments On Your Home Again – There are some cases where you may want to keep your home, and the bankruptcy process will provide a chance to try and work out payment plans or terms with your lender and start making payments again. This is sometimes because the stay on other debts frees up money to pay towards your home.
For a free bankruptcy consultation, call attorney Ryan Alexander today at (702) 222-3476.
