How to Stop Home Foreclosure
Bankruptcy can Stop Foreclosure
The Center for Responsible Lending reports that 702,949 homes have entered foreclosure. That means there’s a foreclosure every 13 seconds in this country. Is the bank threatening to foreclose on your home?
Filing bankruptcy is one way to save a home from foreclosure.
Legally Stop Foreclosure
A homeowner can legally stop foreclosure proceedings by filing bankruptcy. There are two basic types of personal bankruptcy: Chapter 7 and Chapter 13.
Under Chapter 7 bankruptcy, a filer can be excused from paying their unsecured debts (like credit card debt, medical bills and utility bills). But Chapter 7 is typically for people who have little or no income and do not own a home. This is because under Chapter 7, the court has the option to liquidate (sell) a debtor’s home in order to repay his or her creditors.
Chapter 13 bankruptcy is typically the type of bankruptcy people choose if they’re looking stop foreclosure or repossession. Chapter 13 gives a person the chance to repay their past-due debts and get back on track.
How Does Chapter 13 Stop Foreclosure?
Under a Chapter 13 bankruptcy plan, the filer is placed on an agreed-upon repayment plan that typically lasts between three and five years. The filer then makes one lower monthly payment directly to a bankruptcy trustee—there is no contact with creditors. As long the filer stay on track with monthly payments, he or she is allowed to keep secured property. During this time, collection efforts (like foreclosure and repossession) are stopped. At the end of the Chapter 13 repayment plan, if the filer has made all scheduled payments, the bankruptcy court may discharge (forgive) his or her remaining unsecured debts.
The Automatic Stay: Protect Property & Silence Creditors
Another benefit to bankruptcy is that the moment a person files, they typically receive the protection of the bankruptcy automatic stay. The automatic stay is a court order from the bankruptcy court that prohibits creditors from attempting any further debt collection efforts.
This means the bankruptcy automatic stay can STOP:
- collection phone calls & correspondence
- some wage garnishments & lawsuits
- utility shutoffs and more
This stay order was created to protect consumers from credit harassment. It’s a serious violation if creditors violate the automatic stay’s orders. If this sounds like the kind of relief you’re looking for, it may be time to consider filing bankruptcy. Talk to a bankruptcy lawyer today about your options.