If you are facing foreclosure, filing bankruptcy will stop foreclosure temporarily. Filing bankruptcy prevents your creditors, including your lender, from collecting debts against you and contacting you during the bankruptcy proceedings. The court will mail a notice to all your creditors listed on your bankruptcy petition schedule. If any of your creditors continue to try and collect a debt against you, they could be subject to court sanctions and have to pay attorney's fees. However, there is always the possibility that your lender could petition the court to proceed with foreclosure proceedings against you. If the court approves your lender’s request, the lender could foreclose on your home. If you do lose your home to foreclosure, bankruptcy prevents your lender from collecting a deficiency judgment against you.
The following debts are excluded from bankruptcy and will not be discharged: taxes, spousal support, child support, debts relating to willful misconduct or malicious misconduct, personal injury liability or death from driving under the influence or while being intoxicated, nondischargeable debts from a prior bankruptcy, student loans and criminal fines.
Chapter 13
During a Chapter 13 bankruptcy, you can work out an agreement with your lender to reinstate your loan or modify your loan by giving you a loan modification to help you get caught up on your payments so you can keep your home. However, if you default on your mortgage again, your lender can foreclosure. So you should make sure you can afford to make the payments before you make such a commitment. You can also negotiate reductions of your debt with your other creditors as well. The court must approve any payment plan you enter into with your creditors.
Other Options to Stop Foreclosure
You may have other options to stop foreclosure besides filing for bankruptcy. These include:
- Mortgage modification
- Refinancing
- Short Sale
- Selling your home
- Deed in Lieu of Foreclosure
- Reinstatement
- Forbearance
You may just want to sell your home if you have equity, and pay off your mortgage. Another option is to ask your lender for a short sale if you are upside down on your mortgage. A bankruptcy is complicated, and should not be used as a method to stop foreclosure unless absolutely necessary, and you have no other choices.
Get Legal Help
Don’t make any rash decisions before you speak with a bankruptcy attorney. The attorney can explain all your options to you, and answer your questions. The attorney can represent you in court and help you negotiate with your lender to save your home from foreclosure.
