A homeowner who is unable to pay for their mortgage will have to figure out what options they have to avoid foreclosure. In some cases, they may simply accept that they can’t afford the home any longer and pursue options like deed in lieu of foreclosure.
In other cases, the homeowner is willing to do what they need to do to keep their home. For some, filing for bankruptcy might be a viable option. While it won’t stop the foreclosure, it can give the homeowner the chance to catch up on payments.
How does bankruptcy pause the foreclosure process?
When a person files for bankruptcy, the court issues an automatic stay. This halts collection activities for the duration of the bankruptcy. In some cases, the automatic stay will temporarily stop the foreclosure.
The bankruptcy process can reduce the monthly payments the homeowner has to make on the debts that are included in the bankruptcy. This may free up money that they can use to catch up on the mortgage. It’s critical that they work closely with the mortgage company to determine the best option for getting the home out of foreclosure.
Homeowners who file for bankruptcy have to meet certain requirements. Understanding these and determining how the bankruptcy will affect them are both critical. Because of this, it may be best if they work with someone who’s familiar with foreclosure defense and bankruptcy so they can decide if this is the best option to help them keep their home.