Advocating For Consumers In Bankruptcy Filings For More Than 25 Years

2 ways bankruptcy can help if you worry about foreclosure

On Behalf of | Jan 12, 2023 | Bankruptcy

Your home is your shelter from the elements and one of your biggest investments. Many people don’t care about losing other property but will do anything they can conceive of to protect their homes during times of financial hardship.

Sadly, those who experience a sudden drop in household income or similar financial challenges may have a hard time paying their mortgage or catching up once they fall behind. Once you have missed a couple of payments, foreclosure is likely in your immediate future.

During foreclosure proceedings, your lender takes possession of the home that they financed, and you stand to lose every cent that you have invested in the property. If you believe that foreclosure is imminent, filing for bankruptcy can protect you in two separate ways.

The automatic stay will delay certain actions

When you submit your bankruptcy paperwork to the courts, they will send out a notice to creditors and the collection agencies. Most big banks and mortgage lenders have professional services that automatically alert them if one of their clients or borrowers files for bankruptcy.

The automatic stay that the courts grant you will prevent most collection activity until you resolve your case. If your lender hasn’t already initiated foreclosure proceedings, your bankruptcy can give you a little more time to prepare your response.

Some filers can modify their mortgages

If you choose Chapter 13 bankruptcy, renegotiating some of your debts can be part of the process. Your lender may help you by compromising on certain aspects of your financing. From the monthly payments you have to make to how long you make those payments, there can be many changes that you make to the terms of your mortgage that will help you stay in your home and prevent a possible foreclosure.

Lenders are often highly motivated to cooperate with those trying to save their homes, as the foreclosure process can be expensive, and lenders may take a loss when reselling a foreclosed property. Instead of panicking or despairing because of your current financial hardship, you need to evaluate your circumstances and determine your top priorities. If nothing else, bankruptcy can help you end other financial obligations and delegate that money toward paying your mortgage.

Filing for bankruptcy can be part of a comprehensive plan to prevent foreclosure and correct your problematic financial situation.

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