If you're like many Americans, you may be facing harsh financial times. You could even be facing foreclosure on your home. When foreclosure becomes a possibility, many people panic and do not know where to turn.
Panic is understandable, but it will not help you overcome the circumstances. Fortunately, there are other options that can be explored before simply accepting the foreclosure. One such possibility is filing a bankruptcy petition to at least stall the foreclosure process. While no one enjoys the prospect of bankruptcy, it can be a vital survival tool for thousands who have fallen on hard times.
Two forms of bankruptcy, Chapter 13 and Chapter 7, offer an automatic stay of foreclosure, as well as immediate relief from all collection efforts by your creditors. This means that you can get some much needed breathing room to get your affairs in order, at the very least. This relief will last until your bankruptcy has been finalized by the court.
It is possible for a lender to make a special request to the court to proceed with a foreclosure once the stay has been issued. It is good to be aware of this possibility, but it is not something that is frequently pursued. Similarly, if a foreclosure notice has already been filed, you may have a harder time staying it by filing bankruptcy.
Chapter 13 bankruptcy works by allowing you to propose a payoff schedule to your creditors, which the law will then enforce. You are still held liable for all, or most, of your debt, but are allowed to exempt many kinds of property from seizure. Alternatively, Chapter 7 allows you to have debt forgiven, but may not remove the underlying lien against your property. In such cases, it's possible that you may still lose your home even if your debt is forgiven.
The truth of the matter is that there are no easy solutions, but there are better-than-worst-case-scenarios. Your situation may have contributing factors that will influence which plan may be best for you. With the guidance of an experienced bankruptcy attorney, you can explore which options are best for you, and have the help you need to set a course for new season and a fresh start.
Source: Findlaw, "Facing Foreclosure? How Bankruptcy Can Help," accessed Nov. 23, 2016