Can Bankruptcy Stop Foreclosure? The Answer Just May Save Your Home!

Bankruptcy facts and FAQ. Can bankruptcy stop foreclosure? Learn how using bankruptcy to stop foreclosure may just save your home.

Bankruptcy facts and FAQ, many people wonder, can bankruptcy stop foreclosure. If you are threatened with foreclosure, you may be wondering if bankruptcy to stop foreclosure is the right decision for you.

Will bankruptcy stop foreclosure? Is it the right option? What is the best option when it comes to bankruptcy vs foreclosure?

There are definitely a lot of questions to ask. Here is a closer look at this situation and whether or not bankruptcy can provide the rescue that you need when you are facing a foreclosure on your home.

Can Bankruptcy Stop Foreclosure - Bankruptcy Facts

Once you begin missing mortgage payments, lenders can begin to take legal steps towards a foreclosure. This usually takes some time, and the process usually will not begin until you have missed a couple payments.

Usually this time period allows you to look for other options to help avoid foreclosure, such as a short sale, loan forbearance, and other options. However, if these measures have not worked for you, you're probably wanting to know, can bankruptcy stop foreclosure. Here is a look at how you may be able to use bankruptcy to stop foreclosure.

Delaying Foreclosure with an Automatic Stay

Whether you decide to file a Chapter 7 or Chapter 13, one bonus is that the court will give you an automatic stay with the Order for Relief. Can bankruptcy stop foreclosure?

Well, this automatic stay can help. Collection activities have to be stopped with this automatic stay and even if your home is supposed to be auctioned, this will be postponed while your case is still pending. However, there are a couple exceptions to this rule.

Will bankruptcy stop foreclosure? Not necessarily. Even if there is an automatic stay, there can be a motion to lift that stay. This means that the lender can get permission from the court to go on with the sale of the home. However, usually the sale is at least postponed for a couple months.

Another time when you may find that the automatic stay will not work is if the foreclosure notice was already filed. Usually most states require that you get advance notice before you home can be sold in a foreclosure sale. If you already have been given this notice, the lender can go ahead and ask for permission to go on with the sale.

Chapter 13 Bankruptcy Laws

When you are asking can bankruptcy stop foreclosure, one option to consider is Chapter 13. This type of bankruptcy to stop foreclosure can work in some circumstances. Chapter 13 bankruptcy will allow you to pay off late payments over a repayment plan, which may be five years or some other time period.

To keep your home, you will have to be able to pay your regular mortgage payment on time while also paying off the arrears, which is those late payments. If you are able to keep up with both payments until your repayment plan is over, you can keep your home, avoiding the foreclosure. You may also find that second and third mortgages may be stripped away and you may not have to pay them back.

Chapter 7 Bankruptcy Laws

Although Chapter 7 bankruptcy probably won't stop foreclosure in the long run, it can help you to stall the sale of your home, allowing you to have some time to either work something out with the lender or to find another place to life.

While the bankruptcy is pending, you actually can stay in the home without paying and that money saved can be important. All the debt you have will be canceled with this type of bankruptcy as well, which can be helpful, although you may still have tax liability.

Bankruptcy vs. Foreclosure

Can bankruptcy stop foreclosure? Well, in some cases it may be able to, and in other cases it may only postpone the foreclosure.

So, which option is better - foreclosure vs bankruptcy?

Well, there are negative aspects to both bankruptcy vs foreclosure. When it comes to bankruptcy, that will stay on your credit report for 10 years, but the foreclosure may only stay there for 7 years.

On the other hand, even if you go through foreclosure and you don't go through bankruptcy, the lender could possibly come after you for the balance that is remaining if they don't get their money back out of the sale of the home.

Another thing to consider is that if you file only to avoid foreclosure, it could be a bad idea. There is a limit on how often you're able to file, so filing now means you could not file for some time, even if you were in a very bad situation.