If your financial woes have led to you falling behind in paying your mortgage, you may be vulnerable to a foreclosure proceeding. Foreclosure doesn’t happen overnight. The lender that is carrying the debt on your home must notify you that you are at risk of foreclosure in order to provide you with time to make your payments or negotiate a new agreement. It is only when you fail to find a way out of your problem that the lender will finally take the steps needed to sell your home at auction so that they can recover as much of their balance as possible. Though the time that this process takes may give you enough leeway to find a solution that is agreeable to all parties, in some cases your best way to prevent a foreclosure is by filing for bankruptcy.

There are two types of bankruptcy that you can file, and the one that you choose will depend on both your goals and your financial situation. Regardless of whether you file a Chapter 13 bankruptcy — which allows you to reorganize your debts – or a Chapter 7 bankruptcy — which discharges all of your debts but leaves you at risk for losing all of your assets – the simple act of filing will result in the issuance of something called an automatic stay, which delays foreclosure as well as all other collection activities on the part of all of your creditors. This means you will stop getting late notices and calls from debt collectors too.

If your bankruptcy filing is filed under Chapter 7, the automatic stay will mean that even if the lender’s foreclosure process has gone so far that your home has been scheduled for sale, they will have to wait at least three to four months before proceeding unless they file a “motion to lift the automatic stay.” If your bankruptcy is filed under Chapter 13 you may be able to work out a payment agreement that will allow you to negotiate with your lender for the payment of the mortgage payments that you missed or even to reduce the interest or amount of the payments that you are required to make. A plan will be put in place to create a strategy to help you get out of debt while holding on to your house and may even eliminate additional debts such as 2nd or 3rd mortgages that you took out in order to help you pay off your debts.

For more information on how the bankruptcy process may offer you the best way to hold onto your home, call our office today to set up a time to discuss your situation.

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