Worrying about your home being foreclosed on is stressful, and you’re probably looking for any way that you can stop the foreclosure process. The good news is that there are a lot of different options that can help you stop or avoid foreclosure.
Declaring bankruptcy to avoid foreclosure is a popular topic, but you should be wary of it. Bankruptcy is a legal process involving your debt that can have a lot of long-term negative consequences. If you’re looking to find out if bankruptcy will stop foreclosure, you may want to consider all of your options before you decide to file for bankruptcy.
If you’re facing foreclosure, you should contact a foreclosure attorney as soon as possible. An experienced attorney can help you through your options to avoid foreclosure. Contact Joshua Denbeaux today to schedule a free consultation to discuss your case.
What Does Filing For Bankruptcy Mean?
An individual files for bankruptcy when they have debt that they are unable to pay. When it comes to foreclosure, this means that someone is behind or delinquent on their mortgage payments. There are two types of bankruptcy for personal debts.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is bankruptcy for unsecured debt where there is no collateral that would retain the same value as the loan amount. When someone files for chapter 7 bankruptcy, their debt is erased by repossessing the items they are in debt on and erasing the remaining balance of the debt. For example, if you have a car loan that you’re unable to pay and you file for chapter 7 bankruptcy, your car would be repossessed, and any balance owed over the value of the car would be waived.
Typically, if you are a homeowner, you would not file for chapter 7 bankruptcy because you have a mortgage, which is a secured debt. If you fail to pay your mortgage, the home acts as the collateral for the loan.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is more commonly involved with mortgages. Under chapter 13 bankruptcy, your debt isn’t erased. It’s extended to fit a new payment plan so you can pay off your debts.
When any type of bankruptcy is filed, there is an automatic “stay” or hold put on foreclosure proceedings. This means that the foreclosure process is stopped where it is and can’t move forward. While this stops foreclosure, filing for bankruptcy can also have a large impact on your credit. It will lower your credit score for a number of years and make you unable to take out any other credit.
Filing for bankruptcy to avoid foreclosure is not an easy out, and it’s not recommended in every case. Before filing for bankruptcy, it’s important that you explore all of your possible options. Using bankruptcy as a way to avoid foreclosure should really only be used if you’ve already exhausted all of your other options and other solutions won’t work for you.
Other Options to Avoid Foreclosure Instead of Bankruptcy
In our experience, mortgage companies are usually willing to work with homeowners to help them avoid foreclosure. If you’re working with your lender, consulting an attorney is a good idea. Not only can they help look out for your rights in negotiations with your mortgage company, but they can also help make sure you’ve explored all possible options.
A loan modification is an agreement between a homeowner and a mortgage company to modify the original mortgage. In order to qualify for a loan modification, you have to be able to prove that you’re facing some sort of financial hardship that’s made you unable to pay your mortgage. An attorney can help you through the application process by helping you make sure that you have all of the proper documentation and negotiating the changes to your loan.
Refinancing a mortgage means that you are essentially paying off your current mortgage with a new one. Unlike loan modifications, when refinancing your mortgage, you can choose to work with any lender. A refinanced mortgage is considered a completely new mortgage. You’d have to pay closing costs again, but you would get rid of any delinquency on your current mortgage.
A forbearance puts a temporary pause on your mortgage payments. You have to work with your lender to create this agreement. Your lender could also offer you a grace period for mortgage payments, waived fees, or other terms as part of your forbearance.
Contact a Foreclosure Attorney Today
Filing for bankruptcy is an option to avoid foreclosure, but because of the negative, long-term impacts bankruptcy can have, it should only be used as a last resort. Bankruptcy can hurt your credit score and stop you from getting any additional credit for years to come.
If you’re facing foreclosure, the best option to stop or avoid foreclosure is to work with an attorney. A foreclosure lawyer can help you explore options you might not know exist and help you negotiate with your mortgage company while protecting your rights.
Contact Denbeaux & Denbeaux Law today to learn more about how our experienced team of lawyers may be able to help you.