You start getting foreclosure notices in the mail. It’s no surprise. You lost your job and have not been able to make your mortgage payments.
When you tell one of your friends that you are worried you’re going to lose your home, they tell you to file for bankruptcy. They claim that doing so will stop the foreclosure. Is this true?
It’s not entirely true, but there is some truth within your friend’s claims. A bankruptcy filing puts an automatic stay on all other financial legal actions pending against you, such as a foreclosure. This delays the case. It cannot move forward until you get through your bankruptcy case.
Now, a bankruptcy case may take months, and you get to stay in your home at that time. Plus, if your bankruptcy eliminates the other types of outstanding debt you have — credit card debt, etc. — then you may find that your mortgage is affordable again. You may be able to work out an agreement with your lender so that you do not lose your home after all.
That said, bankruptcy does not stop foreclosure forever. When the case ends, the stay is lifted. If you still can’t make those mortgage payments, the foreclosure resumes. It is important that you do not have the wrong expectations. Simply filing does not get you out of foreclosure for good, but bankruptcy is a useful tool to delay foreclosure, get your finances in order, and then move forward.
If you are facing financial hardships, it’s important to know what legal options you have and how they all work together. You may find that there are some positive steps you can take toward a fresh start.