Why Filing For Bankruptcy Helps During Foreclosure

When you are having financial difficulty, you might find it hard to make your mortgage payments. When this happens, the bank may threaten to take back your home and kick you out in a process called foreclosure. During foreclosure, you might want to consider also filing for bankruptcy, especially if you are also struggling to pay your other bills. This information will give you more insight into filing for bankruptcy while you are going through foreclosure.

About the Foreclosure Process

Typically when you are going through foreclosure, you will eventually lose your home. You have probably gotten into this situation because you fell behind on your mortgage payments, and the bank now wants to take the home back. In some cases, you can work with the lender to set up a payment plan due to financial difficulties. However, if you don't see your financial situation changing any time soon, you might want to just go ahead with the foreclosure and get a less expensive home.

Filing for Bankruptcy

You may have already considered filing for bankruptcy if your financial situation is so dire that you can't afford many of your other bills as well. But did you consider the fact that it can actually help with your foreclosure? In many cases, filing for bankruptcy, with the help of a law firm like FactorLaw, during foreclosure delays the foreclosure, or might even stall it enough to get back to where you're able to pay the mortgage payments again.

How to Delay Your Foreclosure With Bankruptcy

While filing for bankruptcy might not avoid foreclosure altogether, it can help delay it. This includes filing for chapter 7 and chapter 13 bankruptcy. As soon as you file for bankruptcy, the court will issue an order for relief, which puts all collection activities on hold thanks to what is called an automatic stay. During this time, nobody that is trying to collect money can attempt to contact you, which also includes putting a hold on the foreclosure process. While the bankruptcy is ending, the lender is not able to move forward with the foreclosure, which can take a few months.

The Exceptions

There are a few exceptions that you should be aware of. First of all, the lender who is handling the foreclosure can file a motion to lift the stay. They will need to get the court's permission to let them continue with the foreclosure process, or to continue selling your home if they already started that process when you filed for bankruptcy. However, you should be able to still postpone it for a few weeks to find another place to stay and give yourself some wiggle room.

The other exception is if the foreclosure was already filed at the time of filing for bankruptcy. This can't stop the clock completely on foreclosure if it was already filed, though this depends what state you are in.