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Understanding How Bankruptcy Can Help with Foreclosure

Foreclosure notice

Your home is likely your most significant asset. Unfortunately, sizable mortgage payments can make it difficult for many people to stay current on their mortgage. Many homeowners decide to file for bankruptcy because they fear losing their home due to missed payments. If you’ve received a notice of foreclosure from your mortgage lender, contact a bankruptcy attorney right away to learn about your options. In some cases, filing for bankruptcy may help you save your home.

Automatic Stay

As soon as you file for bankruptcy, the court will issue an order for relief. This grants you an automatic stay, which prevents any of your creditors from engaging in collections activities. The automatic stay is in effect regardless of whether you choose a Chapter 7 or Chapter 13 bankruptcy. If your home is in foreclosure, the sale will be postponed while the bankruptcy is proceeding. However, your mortgage lender could choose to file a motion to lift the stay. If this motion is granted, your lender could proceed with the foreclosure process. You’ll still have some time to get your finances straightened out.

Debt Reorganization

If you choose to repay some of your debt with a debt reorganization, or Chapter 13 bankruptcy, your missed mortgage payments can be included in the repayment plan. However, you’ll still need to stay on top of your current mortgage payments, in addition to the payment plan, to prevent the lender from beginning the foreclosure procedure again.

Second and Third Mortgage Discharge

If you have a second or a third mortgage, you may be able to eliminate payments on those mortgages altogether by filing for a Chapter 13 bankruptcy. This is possible when you do not have enough equity in your home to secure those additional mortgages. For the purposes of the bankruptcy, that debt would then be considered unsecured debt and it’s often dischargeable.

Here at Cutler & Associates, Ltd., our team of bankruptcy attorneys is dedicated to helping Chicago-area families keep their homes and get back on their feet financially. If you’ve received a notice of foreclosure and you’re considering filing for bankruptcy, contact us today to set up a consultation in Aurora, Schaumburg, or our other convenient locations. You can connect with us by calling (847) 505-0380.

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