Can Bankruptcy Stop Foreclosure?

So many Americans today are facing financial trouble, and that means they are in danger of losing the one thing they worked so hard for - their home. Many times, when facing foreclosure, a homeowner may consider bankruptcy, as there is a myth that bankruptcy can help stop your foreclosure. Here are some points to think about.

First, there are two kinds of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy mans you do not have the money to pay your debts, and your assets are sold to pay your debt, and your unsecured debt is discharged. In a Chapter 7 bankruptcy, you are in danger of losing your home., While your mortgage lender is temporarily stopped from proceeding with foreclosure steps, eventually the bankruptcy court will probably allow them to proceed to sell the house, if you can't make the mortgage payment.s Sometimes, having some time to put off the foreclosure can be a reason to file for personal bankruptcy, but it's not necessarily going to save your home.

Then there is Chapter 13 bankruptcy. This type of filing requires you to set up a repayment plan for your debt. The court will oversee your plan and approve it, and under Chapter 13 you can probably keep making payments on your home and keep it. However without that plan, or if you can't make payments, you will likely lose your home.

In just a very few states, such as Florida, the state bankruptcy law will provide that you can keep your primary residence. Some high profile bankruptcies, like that of O.J. Simpson, are probably responsible for the myth that you can always keep your home in bankruptcy. But this is not the case in most states, and it will depend on your home state's law. BEst to check with a bankruptcy attorney to be sure.

You might be stuck in pre-foreclosure hell, where your lender is starting or is threatening to start proceedings, you are desperate and trying to find out if you qualify for the new government programs. You want to do everything you can to keep your house out of foreclosure including file for bankruptcy. Or, you might be worried about forfeiting a car loan in bankruptcy, especially if it's your only way to get to work to earn money to pay your bills. When you're in bad financial shape, bankruptcy starts to look like a life saver. But remember - bankruptcy will cost you upwards of $2,000 for legal and court fees, as well as make it possible take longer to qualify for credit for some time. Some people do not think that's a bad thing, since often bad credit habits got you here in the first place!

Your credit score after bankruptcy might not be much worse than before, but your bankruptcy credit score and your foreclosure credit score can have different results. Bankruptcy lasts longer on your credit, and can be harder to overcome when getting new credit - lenders won't just look at your score, but also the fact that you filed for bankruptcy.

If you can't get your mortgage lender to work with you on revising your mortgage and loan repayment, then you may have to consider bankruptcy. But remember that it is not a guarantee of keeping your home.

You really should talk to both a bankruptcy attorney and a credit counseling agency, which you will have to do before filing bankruptcy anyway. Calculate how your income, expenses and debt will impact your future financial decisions. You may have to choose between saving your home and protecting your credit score. In such a case, whether your bankruptcy credit score or your foreclosure credit score is more important will be up to you.