Can Bankruptcy Stop Foreclosure?
Bankruptcy has a less-than-ideal reputation when it comes to property, as many believe the myth that filing for bankruptcy will automatically put their home at risk. However, this is not true for all types of bankruptcy.
In fact, some types of bankruptcy were developed specifically to help you save your home.
Below is a quick breakdown of the key time-buying principle that stops foreclosure in its tracks and which Chapter is best for taking back ownership of your property.
The Automatic Stay
Before looking into more detail at which types of bankruptcy can help save your home, we need to understand an important principal called an automatic stay. This is what will cause a halt on your foreclosure no matter what type of bankruptcy you file.
Automatic Stays are a court order that prohibits your creditors and lenders alike from collecting payments from you including collection payments on past due mortgages. This does two things:
- Stops constant harassment from your creditors
- Buys you time to find the best debt management solution for your needs
This automatic stay is the backbone allowing bankruptcy to stop foreclosure in its tracks. Unfortunately, just because your foreclosure is stopped does not necessarily mean it can be reversed or eradicated.
As such, we need to understand how different chapters of bankruptcy affect property assets.
Chapter 7 vs. Chapter 13
While we have written before about the differences between Chapter 7 Bankruptcy and Chapter 13 bankruptcy, knowing how these different fillings affect homeownership is imperative to your decision making process.
Of the two, Chapter 13 is actually designed to help you keep your home.
This is because Chapter 13 is a special kind of consumer bankruptcy geared at helping individuals repay their debt rather than have their debt forgiven. This means that during the process of your bankruptcy, you will reorganize your existing debt and be placed on a budget that allows for you to pay down your dues over the next 3-5 years.
For homeowners, this gives them a second chance at repaying any past-due mortgage amount, giving them a second chance at keeping their home.
Speaking with an Ohio Bankruptcy Attorney
Foreclosure and bankruptcy are both finicky legal matters. Never wait to seek counsel as your situation will only worsen over time.
At the Benson Law Firm, we stay up to date on foreclosure laws as they are a primary form of defending your home. This normally takes the appearance of negotiating work arounds for your property such as loan modification and mediation, either as a replacement or as a preliminary action to bankruptcy.
As someone who has been on both sides of the bankruptcy process, I am dedicated to helping individuals regain control of their debt. Contact us at (216) 400 5126 to speak with a bankruptcy expert in Cleveland, Ohio.