Can Chapter 7 bankruptcy prevent foreclosure?

On Behalf of | Aug 3, 2022 | Uncategorized

There are few things as frustrating as being unable to make ends meet. If you’ve been struggling and received a notice that your home may be foreclosed on, now is the time to take quick action.

By using a tool like Chapter 7 bankruptcy, you may be able to avoid foreclosure and prevent the loss of your home.

Chapter 7 may temporarily prevent home foreclosure

The first thing to keep in mind is that Chapter 7 bankruptcy includes an automatic stay that may prevent foreclosure temporarily. A temporary stay stops collectors, creditors and others from taking action against you while you work on your bankruptcy through the court.

It is possible for a creditor or lender to approach the court and ask for the stay to be removed, so it’s possible for a foreclosure to continue. However, in the short-term, entering in bankruptcy will give you a little more time to figure out how to catch up on payments or handle debt to make paying for your home possible again.

How does Chapter 7 bankruptcy make it easier to reassume your mortgage?

With Chapter 7 bankruptcy, the automatic stay gives you time to go through your debts with the court. The bankruptcy court will evaluate the value of your assets and look at your income, too. Any qualified debts will be discharged, which may free up enough income for you to pay your mortgage.

The bankruptcy court may also make it possible for you to renegotiate with the lender. That means that it could be possible to ask for fees or penalties to be waived, so you can get back on track.

Why would a lender want to work with a debtor?

Even if you are behind on payments, being behind and willing to pay is better than the lender having to foreclose on the home and potentially take a loss when the property is sold. Many lenders will work with you to try to find a solution if you fall behind on payments, especially if you are going through a bankruptcy to get your debt level back under control.