Being faced with the prospect of losing your home can be a scary situation to be in. You may worry about your child’s future and about how you will bounce back after losing your home.
There are many ways to avoid foreclosure. In general, it is necessary to take early action to put preventative measures in place. While it may be possible to avoid foreclosure by speaking to your lender as soon as you find yourself in financial difficulties, filing for bankruptcy is a popular way to address the root of the problem.
How does a bankruptcy filing prevent foreclosure?
When you file for bankruptcy, an automatic stay is put into place. This means that creditors and debt collectors are no longer able to take action against you to regain what they are owed. As a result, your lender will not be able to make further progress on foreclosure proceedings.
Does this mean that the foreclosure proceedings are only temporarily stopped?
An automatic stay is not enough to solve the problem entirely. It only pauses the foreclosure proceedings. However, through bankruptcy, you will be able to engage in strategies to catch up with your mortgage repayments. The strategy that you engage in will depend on whether you choose to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
How will Chapter 13 bankruptcy help me?
When going through Chapter 13 bankruptcy, debts are reorganized in a repayment plan. This makes it possible for you to afford to make repayments and tackle your debts without the stresses of creditor action.
How will Chapter 7 bankruptcy help me?
Chapter 7 bankruptcy is generally reserved for those with a very low income in comparison to their debts. It involves the liquidation of assets to pay off your debts. This means that you could still be vulnerable to losing your home, depending on the amount of equity you have in your residential property.
If you want to ensure that you keep your home or if you just want to get relief from the overwhelming stress of being in debt, consider taking action to file for bankruptcy. By not delaying action, you will be in a better position to stop creditor actions in their tracks.