People invest in their homes from both financial and emotional perspectives. Houses tend to serve as a physical representation of someone’s personality, style and values, so finding and maintaining the ideal home can be an important form of self-expression for many people. Homes can also have emotional value because they are where often experience the most poignant moments in their lives.
Given the value that such property represents both personally and economically, it is common for people to panic when they believe they might be at risk of foreclosure. Those who file for personal bankruptcy benefit from two crucial forms of protection that can help them protect their ownership interest in a home if they are at risk of having this asset seized by a lender.
With an automatic stay
As soon as someone submits paperwork to the courts to initiate the bankruptcy process, the courts extend the protection of an automatic stay. The state prevents collection activity and allows someone to seek the dismissal of pending lawsuits. Any upcoming foreclosure proceedings would likely be subject to the automatic stay, giving someone an opportunity to prepare a response or improve their circumstances. Someone can buy enough time with a bankruptcy filing to properly respond and protect their home.
With an improved budget
When someone files for Chapter 13 bankruptcy, they can renegotiate their debts with their creditors, which allows them to potentially modify their mortgage in a favorable manner. Even if their lender does not cooperate with that process, renegotiating monthly obligations for a creditor repayment plan can make their finances predictable and help them prioritize their mortgage each month. The discharge of someone’s debts after the end of the bankruptcy process will also make it much easier for them to consistently pay their mortgage on time.
Those who want to protect what they have invested in their homes but who recognize that they can no longer balance their monthly budget might benefit from considering personal bankruptcy in addition to other financial solutions. Seeking legal guidance and filing for bankruptcy at the right time could potentially help someone avoid foreclosure and other aggressive collection efforts.