Have you fallen behind in your mortgage payments? Have you received notice that your lender is seeking to foreclose, or are you worried that could happen any day? You may be considering filing for bankruptcy protection as a way of keeping your home. Here are some guidelines to help you make the right decision.
The actual filing of either a Chapter 7 or Chapter 13 petition will not make the foreclosure proceeding permanently go away. When you file for bankruptcy protection, you get the benefit of the automatic stay, which prevents your creditors from calling, writing or taking any legal action outside the bankruptcy proceeding to collect a debt from you. That will apply to your mortgage lender.
When you file for protection under Chapter 7, you can permanently discharge certain debts in exchange for selling some of your assets to satisfy creditors. You won’t be able, however, to discharge the debt on your home and still keep it. You may be able to keep some of the equity in your home, though. If you want to keep your home by filing for bankruptcy, you are best served by filing a Chapter 13. That type of petition will allow you to negotiate new terms on a mortgage loan (if your lender agrees).
This may be the better question to ask yourself. Will you be able to set up payments that you can actually afford? If you have equity in your home, the answer is probably yes. If not, and you have little prospect of setting payments you can make, there’s no point in trying to keep your home, as you won’t be getting ahead. It’s probably a better idea to try to sell your home before foreclosure, as you’ll have a better chance of getting a better price. If the bank forecloses, they’ll only look to recover what you owe them, so they have no incentive to sell the house for more than that.
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