One of the most common questions I get asked is: “Will filing for bankruptcy stop a foreclosure?”
Generally speaking, a Chapter 7 bankruptcy will not stop a foreclosure from proceeding for very long. If you have stopped paying the mortgage bill, filing a Chapter 7 case will allow you a couple months to delay the process. During those 2 to 3 months, however, you may be able to live in the house rent free. Many clients choose to use this ‘lag’ time to save up the money which would be used to pay for a rental or for their old mortgage for moving expenses.
A Chapter 13 bankruptcy case can stop a foreclosure permanently. If you are behind on mortgage payments, you can propose a repayment plan in Chapter 13 which splits up the amount you are behind for up to 5 years. That is, if you are $6,000 behind on your payment, you would be allowed to pay approximately $100/month for 60 months to make up the deficit. The key to a successful Chapter 13 is being in a situation where you have enough current income to pay your monthly bills if you were not already behind. The court calls this requirement, “feasibility.”
Saving your home through bankruptcy may or may not be a reasonable option for you. Because various strategies exist which you otherwise would not know about, it is smart to speak with an experienced professional about your options. For those of you in Western North Carolina, I would be happy to speak with you during a free, confidential consultation.