Is Stopping Foreclosure with Bankruptcy Realistic?

The thought of losing a property to foreclosure is a depressing one. No property owner wants to reach this point, they will try and do everything possible to stop the foreclosure.

There are several ways in which one can try and stop a foreclosure and one of those is filing bankruptcy. However, the big question is does bankruptcy help in stopping a foreclosure?

Filing bankruptcy seems like a strong legal defense against being evicted as you buy more time trying to work out another solution to save your property from being foreclosed.

However, most property owners would avoid this approach because they would not want to damage their credit report for nearly a decade. That is why filing bankruptcy should be considered as a last option when all other avenues have failed.

The fact is that when you file bankruptcy, this will only be a temporal solution to stop foreclosure or any other efforts by the lender to recover their money.

When you file bankruptcy, the federal order for relief goes into effect, immediately stopping the creditor from pursuing collection activities as long as the federal order relief is still in place. This federal order relief stops the bank from moving ahead with its lawsuit against the borrower or have the property sold at a county sheriff sale.

From this point, where the property goes will depend on if the property owner’s file chapter 7 or 13 bankruptcy. You should note that there are big differences between chapter 7 and chapter 13.

The state exemptions and rules will determine which one of the two filers qualify for the property and how to keep under various circumstances. It is advisable to consult with your personal bankruptcy attorney before you move ahead with the filing.

It maybe be much cheaper for you if you studied and understood the process to file bankruptcy on your own using a book or on-line resources that are related to how to file bankruptcy.

According to chapter 7, debtors are allowed to discharge most of their unsecured debts and secured debts as long as the creditors can access the collateral for which secured loan was guaranteed.

This simply means that property owners can discharge a mortgage under this type of filing however, the bank will keep the property as satisfaction of the debt. This also means that the property owners will not have to worry about a deficiency judgement.

Because the property will be considered the best that the bank should expect, all the remaining balance owed by the property owner on the mortgage will be discharged.

According to chapter 13, borrowers have to enter a payment plan in order to catch up with the debts that they have fallen behind. Bankruptcy judges currently lack the authority to lower mortgage balances or negotiate for regular payment plans.

This means that the property owners have to pay back the full amount they have fallen behind and at the same time keep up with the current regular monthly mortgage payments. This can seem to be an uphill task for the property owner, but if they are able to use this approach and go through the 3-5 bankruptcy plan, then they can save their property and continue to pay the current regular monthly mortgage payment.

In the event that the property owner falls back on their payments, the bank will quickly lift the federal order relief and put the property back into foreclosure.

In conclusion, property owners have to weigh the pros and cons of filing bankruptcy as a way of stopping foreclosure before they choose this approach as a solution.

It depends on the property owner on what choice to make, either to file bankruptcy as a way of stopping a foreclosure, or look for other means to save their property.