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How can Chapter 7 bankruptcy help keep my home out of foreclosure

| Sep 11, 2020 | Bankruptcy

If you are struggling to pay your bills, whether due to a job loss, medical emergency or other reason, one of the first things you might fall behind on is your mortgage payment. Your mortgage probably is the single largest bill you pay each month. Without the funds to meet your obligations, you have to make tough choices. Missing a mortgage payment or two might seem like the least bad option while you figure out what to do.

Eventually, though, your lender is going to threaten foreclosure. Foreclosure is the legal process by which a mortgagee (lender) takes possession of a mortgagor’s (property owner’s) property due to nonpayment. Usually, the bank then sells the home at auction and keeps the proceeds. Most of the time, as the owner, you are left with nothing.

Fortunately, there are ways you can put off going into foreclosure. One strategy is to file for Chapter 7 bankruptcy.

How does bankruptcy help Roanoke homeowners in foreclosure?

One of the benefits of Chapter 7 bankruptcy is that once you file, the judge will issue an Order for Relief that puts an automatic halt or “stay” on foreclosure proceedings. This can pause your foreclosure by about three months to four months.

While bankruptcy does not cancel foreclosure, it does buy you and your attorney time to negotiate with the lender. Foreclosure is a long and expensive process, and many lenders are willing to consider alternatives like renegotiating your loan or conducting a short sale. In a short sale, you sell your home to a third party for less than the amount due on the mortgage, and the bank collects the proceeds. While a short sale does not allow you to keep your home, it does affect your credit score as much as a foreclosure would.

Get the information you need about foreclosure and bankruptcy

Before deciding what to do about your home after it has gone into foreclosure, consider talking to a bankruptcy lawyer. You should know all your options before you make your next move.