DOES BANKRUPTCY STOP FORECLOSURE?

Ultimately, filing for bankruptcy does initiate a brief stay from foreclosure but it does not guarantee that you will get to keep your home.  In fact, the majority of people that file bankruptcy usually still end up being foreclosed.  One of the biggest factors determining if you will get to keep your home or not is depends on what type of bankruptcy you file.

The process of filing for bankruptcy usually looks like this…

An individual has a life change that affects their finances.  They wrestle with it for months hoping things will improve but they continue to get worse.  After a few missed mortgage payments and dwindling hope, that person considers bankruptcy as a remedy to wipe out debt, save the house, and hit the “restart” button.  At this point, that individual will likely meet with a bankruptcy lawyer, who will inevitably tell them bankruptcy is definitely the correct answer. 

I must pause here because I need to issue a few disclaimers…  1.  I have nothing against lawyers.  Many are very bright, intelligent, and good people.  2.  Sometimes they are correct and bankruptcy is that person’s best option. 

But honestly, what are the odds that a Bankruptcy lawyer is going to tell you that you shouldn’t file bankruptcy???  I would venture to say slim to none...There job title is literally that of a Bankruptcy Lawyer!  Let’s take this idea a step further…what is a bankruptcy lawyers goal?  In a nutshell, they help people settle outstanding debts so that an individual can have a fresh start financially.  They are Bankruptcy Lawyers, not “Save Your Home from Foreclosure Lawyers”!  Saving your home is usually very low on a Bankruptcy Lawyers radar…why?  Because your home is usually one of the biggest debts in your portfolio.  Settling your debts while leaving the most expensive debt in place usually just isn’t feasible; which is why it only makes sense that most Bankruptcy Lawyers will eventually tell you that you will need to leave your home behind.

CHAPTER 13 & YOUR HOME

Chapter 13 is the best bankruptcy choice if keeping your home is one of your Bankruptcy Goals.  In Chapter 13, missed mortgage payments and penalties may be rolled into your payment plan allowing you to pay a little bit at a time.  This repayment plan will be calculated to account for all of your disposable income.  It will paid directly to a trustee who will then distribute the funds to the creditors accordingly, and missing or being late on a payment puts your case at risk of being revoked. 

CHAPTER 7 & YOUR HOME

Chapter 7 is the most common bankruptcy filing, as it is a true “restart button”.  If you are facing foreclosure, a Chapter 7 Filing will wipe out your personal liability to repay the the debt but the Bank retains the right to foreclose on the house and they will.  Chapter 7 stops the Lender form calling to collect the debt but it doesn’t stop them from foreclosing on the property.

I would be happy to review all your options with you, whether it leads to a commission for me or not.   

Consider me your “Save My Home From Foreclosure Lawyer”!

For a free, no-obligation consultation…fill out the contact information below.

Delrick Brown
Delrick Brown
REALTOR®