You lost your job through no fault of your own, and now the mortgage lender has been threatening to foreclose on your house. You’ve already spent through your savings, and you are trying to get a new job, but it’s hard right now. Is there anything that you can do to stop that foreclosure and keep your home?
Bankruptcy creates an automatic stay
The first thing you should know is that filing for bankruptcy puts an automatic stay on some of your other court cases. This includes a foreclosure case. Think of it as hitting the pause button. Even if that case was already moving forward, it has to be put on hold.
This does not last forever. The automatic stay on its own will not stop your foreclosure. It just delays it until you get done with the bankruptcy case. Then the foreclosure can continue. But don’t worry; there are still other benefits you need to consider.
Sorting out your financial situation
The way that bankruptcy may stop a foreclosure is by giving you a chance to really sort out your financial situation and eliminate the problems that are causing the foreclosure in the first place.
For instance, maybe you just got another job. You now earn a wage again, though you can’t instantly pay back what you owe on the house; the salary isn’t that good. Under Chapter 13 bankruptcy, often called a plan for wage earners, you can set up a repayment plan for your debt. That could take your current debt and spread it out over five years, for example, meaning that you can afford the debt and your future mortgage payments. This can help you get current on them and save your house.
Digging into your options
This is just one way that one type of bankruptcy works. You have a lot of different options. If you’re facing financial hardship, make sure you take the time to consider how all of them may help you.