Debt is insidious. It creeps up on you until suddenly what was just a skipped payment or two turns into your bank sending you a notice that they’re beginning a foreclosure action. You may fear filing for bankruptcy, thinking it would be a mistake because of its long-term effect on your credit rating. But keep in mind that bankruptcy will give you the chance of forestalling or stopping foreclosure while at the same time eliminating or lowering your dischargeable debt, while just letting a foreclosure happen leaves you with all your unpaid bills and will still put a black market on your credit history. We know the decision can be overwhelming. Here’s what you need to know.

Foreclosure is a process that the bank or lender won’t take until several mortgage payments have been missed. Once you’ve missed enough payments, they are required to send you a notification that they are about to begin the process of selling your home at a foreclosure auction. If you have received this type of notice it does not mean that the process is unalterable. The steps required can take months, and in this period of time, you have the opportunity to take steps to stop it, or at least slow it down. Filing for bankruptcy is one of the most effective ways of doing this.

When you file for bankruptcy it puts an automatic stay on all bill collection actions that your creditors are taking, and this includes foreclosure. The automatic stay buys you at least three or four months, and during that period you may be able to negotiate with the bank or investigate other options, including a short sale or renegotiating the terms of your loan.

The type of bankruptcy that you file (and qualify for) will have a big impact on your ability to fight a foreclosure. Only a Chapter 7 bankruptcy will fully eliminate your dischargeable debt, but it does so at the cost of having to give up most of your assets. If you are willing to walk away from your home, this may be your best option. Alternatively, if you truly want to keep your home, filing for Chapter 13 will allow you to restructure your debt, giving you more time to pay and possibly improving your terms. You may even be able to eliminate loans that were secured by the value of your house.

To fully explore how filing for bankruptcy can help you hold on to your home, you need the help of an experienced bankruptcy attorney. Contact us today to set up a time to discuss the specifics of your situation.

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