Can Bankruptcy Stop a Foreclosure?
Due in large part to the financial crisis that the United States has gone through over the past several years the number of foreclosures across the nation has hit record highs. For most people, being in their own home remains the American dream. Having that dream threatened by foreclosure can be terrifying. If you have been notified that foreclosure proceedings are going to be initiated in the near future, or if you are already in the middle of foreclosure, filing for bankruptcy will stop a foreclosure sale of your home.
Most homebuyers cannot afford to pay cash for a home. Therefore, it is common for a home buyer to take out a mortgage loan to purchase a home. The home itself serves as collateral to secure the loan. If the borrower defaults on the loan the lender may foreclose on the loan and retake possession of the collateral to satisfy the debt owed by the borrower. Not only may you lose your home as the result of a foreclosure, but you may also still owe a debt to the lender if your home sells at the foreclosure auction for less than you owe the bank. For these reasons, it is imperative that you consider all options available to stop the foreclosure. In many cases, bankruptcy is the best option.
Many bankruptcy attorneys recommend the filling of a Chapter 13 bankruptcy case in order to stop a foreclosure sale. When a Chapter 13 case is filed, you must start paying your regular mortgage payments, and your paycheck is garnished in order to make up the missed mortgage payments and the rest of your debts.
I believe, a more practical solution is for a borrower to file Chapter 7 Bankruptcy case and then seek a home loan modification. A home loan modification can reduce the interest rate and capitalize the missed payments over the life of the modified loan. No garnishment of your wages occurs and you are only in the Chapter 7 bankruptcy case for three to four short months. Most of your unsecured debt is discharged and you can begin restoring your credit. I have found this to be a much better solution to helping homeowners retain their homes.
The key to stopping foreclosure is to consult with an experienced Texas bankruptcy attorney if your home is subject to foreclosure proceedings and you want to keep your home.