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Can Filing for Bankruptcy Prevent a Home Foreclosure?

Posted on in Foreclosure

Gurnee Bankruptcy LawyerHomeowners who have encountered financial difficulties may be unable to make mortgage payments while also paying other debts and covering their ongoing expenses. If a person defaults on their mortgage by missing one or more payments, they may receive a notification from their lender stating that if they do not address this issue, the lender will begin foreclosure proceedings. In these situations, a homeowner will want to understand whether there are any options that may help them avoid losing their home. In some cases, bankruptcy may be used to address an impending foreclosure or put a halt to foreclosure proceedings that have already begun. 

How Bankruptcy Will Affect a Foreclosure

When a homeowner files a bankruptcy petition, an automatic stay will apply to their case. This stay will prevent creditors from taking any actions to collect debts, and they must cease any collection proceedings that have already been initiated. The automatic stay applies to foreclosure proceedings, and it will prevent a lender from beginning the foreclosure process or stop them from putting a home up for auction or attempting to evict the homeowner from the property.

While the automatic stay will provide a homeowner with some breathing room, it will not be a permanent solution. As the homeowner proceeds with the bankruptcy process, they can determine their best options for addressing their past-due mortgage payments, becoming current on their loan, and ensuring that they will be able to make ongoing payments.

In most cases where a homeowner will be looking to maintain ownership of their home, they will pursue a Chapter 13 bankruptcy. In this type of bankruptcy, certain types of debts will be consolidated, and some or all of these debts will be repaid through a repayment plan. The amount that a person will pay through this plan will be based on the disposable income that is available after they have paid other ongoing expenses, and payments will be made over a period of three to five years. A homeowner will need to make ongoing mortgage payments along with the payments in their Chapter 13 plan. However, any payments that were missed and the related fees or penalties can be included in the repayment plan, and once the plan has been completed, the homeowner will be current on their mortgage. The completion of the repayment plan will also allow for the discharge of unsecured debts, and this can help a homeowner make sure they will be able to make ongoing mortgage payments and maintain financial stability in the future.

Contact Our Libertyville Foreclosure Defense Lawyers

The threat of foreclosure can be very troubling, and homeowners will want to understand the options that may allow them to prevent the loss of their home. At Newland & Newland, LLP, our lawyers can help homeowners determine whether filing for bankruptcy will be beneficial, and we can also assist with other related issues, such as loan modifications or short sales. Contact our Round Lake foreclosure attorneys at 847-549-0000 to schedule a free consultation today.





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