Being notified of a foreclosure action is one of the most chilling things that a homeowner can face. This legal process is not something that happens randomly or that a lender wants to pursue: it generally takes repeated missed mortgage payments and warnings before a lender moves to take action.

If your debt has resulted in you missing so many payments on your real estate loans that the bank is looking to repossess it, then filing for bankruptcy may offer you temporary respite, but the type of bankruptcy you file for and the timing of your filing will both play an important role in how it goes.

One of the biggest ways that filing for bankruptcy can help a person facing foreclosure is the automatic stay. This is a legal action that takes place as soon as a bankruptcy filing is received. It stops all creditor actions, from collection calls to foreclosure proceedings, until the bankruptcy is resolved. At the least, this will allow you to buy time and figure out your next best steps.

The best way for you to figure out what you should do next and what your options are is to speak to an experienced bankruptcy attorney, but here is a basic overview:

• If you file (and qualify for) a Chapter 7 bankruptcy, there is a chance that you will have to liquidate all of your assets as part of the discharge of your debts. If your home doesn’t qualify for exemption and/or you can’t catch up on your missed payments, there’s a good chance that the foreclosure is going to go through after the bankruptcy process is over.
• If you file for a Chapter 13 bankruptcy, the court will craft a repayment plan that helps you catch up on missed payments, usually with more advantageous terms. This may mean a more extended period for paying your debts off or a reduced interest rate. A Chapter 13 bankruptcy gives you a much better chance to repay what you owe and stop a foreclosure action.
• Loss mitigation or loan modification are both possibilities, but to make this work you’ll need to be able to agree to challenging terms that show that you will be able to make payments in the future.

Foreclosure is a frightening prospect. An experienced bankruptcy attorney can help you understand whether filing for bankruptcy is the right move for you, and explain all of your options. For more information, contact us today.