Filing bankruptcy versus foreclosure

Foreclosure or bankruptcy?

These two options are not mutually exclusive as some think.  If you are facing one of them you may be facing the other as well.  Since filing for bankruptcy will eliminate some if not all of your debts,  you can decide to file bankruptcy before a foreclosure on property the debt most likely will be discharged of that debt. The mortgage lien on the property will stay however, so if you fall behind on those payments the creditors may still decide on foreclosure.   So the order in which you proceed with a bankruptcy and foreclosure becomes an important consideration.

Bankruptcy can be a great tool to help you to keep your house.  When you file for a bankruptcy this puts a legal doctrine called “the automatic stay” on your house allowing you to keep it at least for a period of time and will keep the creditors from collecting your debts until the bankruptcy is finalized which usually takes about three or four months.  This stay can be accelerated by the creditor if they want to get the property back quicker.   If the lender files a motion to lift the stay or the foreclosure has already been filed, these are exceptions that will make it so you can’t buy yourself more time. Speaking with an experienced bankruptcy attorney will help you make the best decision based on your situation.

Chapter 13 bankruptcy can help eliminate payments on second or third mortgages and help you save your home.  If your goal is to protect your home then seriously looking into a Chapter 13 bankruptcy case should be giver consideration.  In you choice is to do a Chapter 7 bankruptcy to forgives the debts – it won’t lift the lien and you will probably still lose your home.  So make sure you ask about both kinds of bankruptcy during your first consultation with an attorney.

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