When you’re struggling to meet your financial obligations, one of the first debts that can get away from you is your mortgage. Unfortunately, it won’t take long before you find yourself involved in foreclosure proceedings. Perhaps there’s light at the end of the tunnel—you can see that your financial situation will improve dramatically in the near future, but you need to buy some time to get you there. Is it possible to avoid foreclosure with a personal bankruptcy petition?
You Can Suspend Foreclosure Proceedings by Filing for Bankruptcy Protection
There are two strategies available through a bankruptcy filing. You can permanently discharge debts in exchange for the sale of certain assets—a Chapter 7 filing. You must qualify for protection under Chapter 7 by submitting to a “means test,” where you demonstrate to the bankruptcy court that you lack the means to repay your creditors over a period of time. If you fail the means test, your only recourse is through Chapter 13, where you can renegotiate your debt to be paid over a three-to-five year period.
The first thing to understand is that you cannot typically discharge debt on secured assets. Accordingly, you won’t be able to discharge a mortgage and keep the house. That means that your only realistic option in bankruptcy to avoid foreclosure is through a Chapter 13 petition.
When you file your Chapter 13 petition, an automatic stay goes into effect, prohibiting your creditors from taking any action outside the bankruptcy proceeding to collect the debt. As a practical matter, then, your foreclosure proceeding will be temporarily suspended until the stay is lifted. While the stay is in effect, you won’t have to make most payments. Under an ideal scenario, you can put some money way during the automatic stay, negotiate a new (and lower) mortgage payment, and refinance your home loan when you emerge from bankruptcy.
Contact Heath, TX Bankruptcy Attorney Carrie Weir
I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.
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