Will filing for bankruptcy stop your foreclosure? |
By David Pilley on September 17, 2011
.jpg.aspx?width=75&height=75) If you believe filing for bankruptcy can stop your foreclosure, you are correct… to a degree. Foreclosure is just like a creditor trying to collect a delinquent debt or late fees on a credit card, except it’s a much bigger deal involving the physical place you live. Bankruptcy may be able to prevent the repossession of your home for a short period of time. It depends on the automatic stay.
When bankruptcy is filed, an injunction called automatic stay occurs. It stops any action a creditor might currently be taking against you. An automatic stay prevents these events from occurring: law suits (whether beginning or continuing), collection calls, wage garnishments, repossessions, and, what may be most important to you, foreclosure sales. An automatic stay does not stop criminal proceedings, tax audits, or actions to collect child support. Remember that there are two major types of bankruptcies under which regular people can file. Chapter 7 is liquidation of your funds, and Chapter 13 is a restructuring of your funds.
I really need to stress that an automatic stay is only temporary. It can be lifted when your bankruptcy is discharged, when the item of property is no longer “property of the estate,” or when a judge lifts the stay him/herself. Chapter 7 bankruptcy may last only a couple of months. A Chapter 13 bankruptcy, however, is in effect as long as your repayment plan lasts, which may be up to five years. It is also important to note that first time bankruptcy filers get the most out of an automatic stay. If you have had a prior bankruptcy filing, your automatic stay will last 30 days. If you have filed bankruptcy more than once, you will not be allowed an automatic stay.
Though bankruptcy is a last resort, it will prevent immediate foreclosure. Filing under Chapter 13 will prevent home foreclosure for a much longer period of time than Chapter 7, however. Chapter 13 also has less impact on your credit rating, but it only works if you have sufficient income to make the payments. The American Bar Association reports that a majority of homeowners who file under Chapter 13 eventually lose their homes to foreclosure because of inability to make the payments set by the restructuring plan. Therefore, if this is the case for you, you will have a bankruptcy and a foreclosure on your record. Because of the possible outcomes, bankruptcy is ALWAYS a last resort. You really should not consider it unless you absolutely have no other option.
|
Current Rating: 0 (0 ratings)