Should I File Bankruptcy Before or After Foreclosure?
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Should I File Bankruptcy Before or After Foreclosure?

Filing bankruptcy before foreclosure may allow a person to stop foreclosure proceedings before they even begin.

If the bank has already started taking action, filing bankruptcy after the foreclosure papers roll in may help stop proceedings in their tracks.

Many people file bankruptcy after a foreclosure. Under Chapter 7, foreclosure may be delayed for a few months. Under Chapter 13, filers may be able to stop foreclosure altogether and save their homes.

To learn more about bankruptcy’s ability to stop foreclosure, fill out the free bankruptcy evaluation form below. Each situation is unique. Ask a local attorney bankruptcy questions about your specific situation:

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Many People Stop Foreclosure through a Chapter 13 Bankruptcy Filing

When people file for Chapter 13 bankruptcy, they work in tandem with their creditors and the bankruptcy court to create a new payment plan for their debts. This plan often includes home mortgage loans.

In Chapter 13, bankruptcy filers are given an extended period of time to catch up on their overdue mortgage payments. During this process, a home foreclosure may be avoided if:

  • The filer catches up on his or her overdue payments, usually over the course of a few years.
  • The filer makes consistent payments over the period of the bankruptcy. Typically, this results in some of his or her unsecured debt being discharged. With these bills clear, it may be easier to make your regular monthly mortgage payments.
  • Filers may also be able to save money on a second or third mortgage by categorizing them as unsecured debts.

Thus, filing for Chapter 13 bankruptcy after foreclosure may allow people to save their homes from aggressive lenders.

Chapter 7 Bankruptcy and Foreclosure

If a filer goes through Chapter 7 bankruptcy before foreclosure, he or she might shed some unsecured debts, freeing up money for mortgage payments. This could potentially prevent foreclosure from happening.

Filing for Chapter 7 after foreclosure may also provide some benefits, including:

  • The automatic stay, which often kicks in immediately after filing bankruptcy, may stop a foreclosure proceeding for a few months. This might allow homeowners to negotiate better terms with their lenders.
  • Filers may save money during bankruptcy, which can be used to find new lodging if a foreclosure cannot be stopped.
  • Chapter 7 may also cancel mortgage debt, allowing filers to seek new shelter without having to pay for a house they no longer live in.

The question of whether people should file bankruptcy before or after foreclosure depends on several different factors.

Contact a local bankruptcy attorney today to discuss your unique situation.

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