You’re facing foreclosure simply because you lost your job and you can’t afford to make the mortgage payments. You’re in the process of looking for another job, but your lender has had enough of the missed payments and has informed you that they’re going to start the foreclosure process.
What you’re considering is declaring bankruptcy. Since you’re not working, you may qualify for something like Chapter 7, which liquidates non-exempt assets to clear some of your debts. If you do this, would it stop the foreclosure?
It creates an automatic stay
If you file for bankruptcy, the first thing that’s going to happen is that an automatic stay is going to be put on your foreclosure case. Technically, this also happens to any other collections efforts that are occurring. They’re not allowed to proceed during the foreclosure, so they’re all put on hold until it is over.
That doesn’t mean that you get to keep your house while eliminating all of the debt from the mortgage. And it doesn’t mean that the foreclosure can never happen again. It just means that the foreclosure has to pause, perhaps for months, while you work out the bankruptcy.
This could be beneficial to you because eliminating other debts may help to make your mortgage affordable. This also buys you some time to find another job, which was the main issue that you were facing in the beginning. If nothing else, it just puts the foreclosure off by a few months so you can figure out how to move forward.
This is just one option if you find yourself facing these types of issues, so make sure you know about all of the legal steps you may want to take.