If you are wondering if bankruptcy can stop foreclosure, you are not alone. Fortunately, you have options.
What is Foreclosure?
The process of foreclosure usually begins after falling behind on mortgage payments. Next, the lender will prepare to sell the home at auction. The money collected through the auction is then applied to the mortgage balance. For more information on the foreclosure timeline, click here.
How Bankruptcy Can Help?
An automatic stay begins when a bankruptcy is filed. The automatic stay is a court-ordered injunction that helps to protect you from creditors. It also legally allows consumers to retain their properties while working out a resolution for their debt.
Chapter 7
If your home has already been scheduled for foreclosure, filing for Chapter 7 will legally postpone the sale while your bankruptcy is pending. A trustee is appointed to sell off assets not marked exempt. So, the resulting money is used to repay your creditors. With the automatic stay, the trustee has time to sell off your property instead of foreclosing. For more information on how Chapter 7 works, click here.
Chapter 13
With Chapter 13, an automatic stay is placed to give time for restructuring debts. Meaning, your home can be saved. In Chapter 13, you are given a three to five year period to resolve your delinquent accounts. During this time, you will be able to pay arrearages on your mortgage loan.
Why You Should Not Wait
Taking fast action is key! In California, it is possible to foreclose on a property without an actual court proceeding. However, these types of foreclosures will typically begin with a recorded Notice of Default. So, speak with an attorney as soon as the Notice of Default is served to maximize your options.
Need Help?
If you’re facing a foreclosure and concerned about what to do next, call us today.