Introduction
Are you struggling to keep up with your mortgage payments and other living expenses? If so, you may be considering filing for bankruptcy to avoid foreclosure. But, can filing for Chapter 7 bankruptcy really help you stop foreclosure? And if it can, for how long?
In this article, we'll explore what Chapter 7 bankruptcy can do for you in this situation, and whether it's the best option for you.
Chapter 7 bankruptcy is a form of bankruptcy that can help you discharge most, if not all, of your unsecured debts, such as credit card balances and medical bills. However, it may not be able to completely eliminate your mortgage debt. While filing for Chapter 7 bankruptcy can temporarily stop foreclosure proceedings, it may only provide a short-term solution.
One of the benefits of filing for Chapter 7 bankruptcy is that it can give you time to get back on your feet financially. Once you file, an automatic stay goes into effect, which prevents creditors from taking any further action against you. This includes foreclosure proceedings. However, the stay is only temporary and will eventually expire.
Another option to consider is Chapter 13 bankruptcy. This type of bankruptcy allows you to reorganize your debt and create a payment plan to catch up on missed mortgage payments. This can help you keep your home and avoid foreclosure in the long run. However, it's important to note that Chapter 13 bankruptcy requires you to have a steady income and may take several years to complete.
Ultimately, the best option for you will depend on your individual circumstances. It's important to consult with a bankruptcy attorney to discuss your options and determine the best course of action. With the right strategy, you can regain control of your finances and avoid foreclosure.
What is Chapter 7 Bankruptcy?
Let's start by discussing Chapter 7 bankruptcy, which is also known as liquidation bankruptcy. When you file for Chapter 7, a bank trustee is usually appointed to liquidate your assets to pay off your debts. This means that any secured debt that you have, which is backed by collateral, such as your home or car, may be sold to repay the creditor. However, at the end of the process, the court will discharge most of your debt.
Now that we understand the basics of Chapter 7 bankruptcy, let's talk about how it can help you keep your home from being foreclosed.
Chapter 7 bankruptcy can be beneficial in preventing foreclosure of your home. When you file for Chapter 7, an automatic stay is put in place, which prohibits creditors from taking any further collection action against you. This means that your mortgage lender cannot foreclose on your home while the bankruptcy case is pending. However, it's important to note that Chapter 7 bankruptcy does not eliminate your mortgage debt. If you wish to keep your home, you will need to continue making mortgage payments after the bankruptcy case is closed.
While Chapter 7 bankruptcy can be helpful in preventing foreclosure, it's important to consider the potential drawbacks. One major disadvantage is that you may lose some of your valuable assets, such as your car or other personal property. Additionally, not all debts are dischargeable in Chapter 7 bankruptcy, such as student loans and tax debts. It's important to discuss your specific situation with a bankruptcy attorney to determine if Chapter 7 bankruptcy is the right option for you.
Does filing for Chapter 7 bankruptcy stop foreclosure?
Yes, filing for bankruptcy can stop foreclosure proceedings. When you file for bankruptcy, all debt collection and foreclosure proceedings must immediately stop. However, this does not mean that the foreclosure process is over. It just means that the bank has to wait to continue with their proceedings. There are two ways that banks can continue to foreclose on your house, even after you file for bankruptcy.
The first way is if you still haven't caught up on missed payments or you are still missing new payments by the end of your bankruptcy hearing. In this case, the bank can continue pursuing you for payment once your case is complete, and the automatic stay, which keeps lenders from collecting, is lifted. This removes your protection from foreclosure.
The second way is if the bank does not want to wait for your hearing to come to an end, they can file a motion to lift the protection so that the foreclosure can proceed. However, the court would only grant this motion if the foreclosure is legal, the property has substantial equity that is not exempt, the lender did not comply with procedural requirements, or the lender cannot produce sufficient evidence to show it has the authority to seek foreclosure.
If the court decides to lift the automatic stay, you are once again going to be in danger of foreclosure.
Do I Qualify for Chapter 7 and What Is the Cost?
If you're considering filing for Chapter 7 bankruptcy, you may be wondering if you qualify and how much it will cost. Fortunately, we've created a tool to help you estimate both. Our bankruptcy cost and qualification calculator is based on means testing forms, which are used to determine eligibility for Chapter 7 bankruptcy.
Simply use the calculator below to input your financial information and see if you qualify for Chapter 7 bankruptcy. The calculator will also provide an estimate of the cost of filing for bankruptcy.
Something else to consider
If you're facing foreclosure, you may be considering filing for Chapter 7 bankruptcy. While this option can provide temporary relief, it's important to know that it may not be the best long-term solution. Even if you file for bankruptcy, the bank can still foreclose on your house. Plus, there's another risk to consider: if your home has more equity than is protected by an exemption, your bankruptcy attorney can sell it to pay off your debt. If this is the case, your bankruptcy trustee will sell your house anyway. So, before you file for Chapter 7 bankruptcy, it's important to carefully weigh the potential risks and benefits.
