If facing a mortgage lender foreclosure, many people are at a loss as to whether they should allow the foreclosure to take place, or if they should file for bankruptcy. Either/or doesn’t always cut it, and deciding between the two is always a hard choice to make. A foreclosure occurs when a mortgage lender is not paid its monthly payments. You must pay the lender who is filing the action in order to prevent the action from going forward. As an example, if you don’t pay your car payment every month, your car will be repossessed. Therefore the same result will apply to a person who does not pay his mortgage payments - he will lose his home through foreclosure!
For someone who cannot pay his or her debts, bankruptcy is a legal action they can take. This action stops all civil proceedings against the debtor while the debtor is in bankruptcy. As a result, the mortgage lender is incapable of immediately continuing their foreclosure, or any other legal action. Still, the mortgage lender will respond by filing for relief from the stay, and once they are granted relief, the proceedings will continue. In other words, no, bankruptcy will not stop foreclosure - the only way to do this is to make payments to your lender. The best bankruptcy can do is slow down the process, but it cannot stop it entirely.
Sometimes a foreclosure is avoided through a bankruptcy, because bankruptcy boosts the time a person has to make the payments. Since bankruptcy requires a mortgage lender to suspend a foreclosure action, a debtor has a little time to raise the money to pay the lender. Since the act of filing bankruptcy can get rid of many unsecured debts completely, a person who is in debt may find themselves with more money that they can pay their mortgage payments with. Another benefit is that a chapter 13 bankruptcy filing will allow a debtor to pay their mortgage catch up through a court ordered payment plan.
Of course, there is a good chance that a debtor might not actually be able to file for bankruptcy, as eligibility is an issue, and even if they do qualify, there are legal fees that need to be paid. Legal costs and fees might actually end up being more than the amount needed to catch up on the past due mortgage payments. Discussing bankruptcy over with a licensed lawyer is an important step for anyone trying to avoid or halt a foreclosure. Due to the complicated legal procedures involved in bankruptcy, it is definitely a procedure that you should not handle by yourself. This article is general information so if you have any questions of any nature about this subject then you need to talk with a lawyer licensed in your state.
