Bankruptcy and foreclosure are often talked about together because they are related to financial issues people may be having. Someone who is facing foreclosure has stopped making mortgage payments, likely for a few months before the lender would even initiate this process. If they are struggling to make ends meet and considering bankruptcy, it makes sense that those mortgage payments would be missed.
But can filing for bankruptcy actually put an end to the foreclosure? Could it be the solution that that person needs to stop their home from being reclaimed by the lender?
Setting up an automatic stay
Bankruptcy can be helpful in a few different ways. First and foremost, it creates an automatic stay that does stop at the foreclosure case for a time. It does not stop it forever. The automatic stay stipulates that the foreclosure case cannot move forward until the bankruptcy case has been completed. This buys a person more time in their home and gives them options to re-organize their finances.
That is the second way that bankruptcy can be helpful. After finances have been reorganized and some debt has been eliminated, the person may be able to create a post-bankruptcy budget that includes their mortgage. They can then get current on their mortgage payments once again and keep their house. This is how bankruptcy can help for longer than just the duration of the automatic stay.
Working through the process
Are you thinking about declaring bankruptcy or are you facing foreclosure? Be sure you know how the two may be related and what legal options you have.