If you’re facing a looming foreclosure, then bankruptcy’s Automatic Stay can provide immediate protection from the moment you file all the way through the duration of your case.
That’s great for today. But you may be more concerned about what will happen to your home after filing bankruptcy.
While the Automatic Stay is an important part, the real power of bankruptcy can be seen when you look at its long term protections for your home.
The goal of bankruptcy is to provide you the relief and protection you need to get control of your debt. Part of this process is providing short-term relief measures, like the Automatic Stay. But these efforts would be hollow if they didn’t help keep you in your home for years to come.
There are two main types of bankruptcy, Chapter 7 and Chapter 13, and they each offer different protections for your house.
Chapter 13 long-term home protections: Chapter 13 to stop foreclosure is designed to offer the strongest protection for your home.
There is no property sale in a Chapter 13 bankruptcy. Instead, your mortgage debt, along with all of your other debts, will be combined, ordered and often reduced. Then, you’ll make one monthly payment to a court-appointed trustee.
During your court-approved repayment time period, typically 3-5 years, you will be protected by the Automatic Stay. As long as you make your monthly payments your home should be totally protected from foreclosure.
Then, once you’re finished, your past mortgage debt will be resolved and you can begin a fresh start.
Chapter 7 long-term home protections: Each state has very specific exemptions.
In most Chapter 7 bankruptcy cases, there is no property sale. But you should still know the exemption rules in your state before you file to ensure that you are protected.
In some states, your entire homestead will be protected. In others, there may be limits on property size or home value. To know if your home will be protected by the exemptions in your state, speak with a local bankruptcy lawyer.
If your home is covered under the exemptions, then it will not be sold to pay off your debts. With an exempt home, you shouldn’t have to worry about foreclosure as long as you stay current on all payments going forward after bankruptcy, which should be easier with the burden of past debts removed and without the stress of a looming foreclosure.
Bankruptcy may protect you from foreclosure that threatens your home today, and provide the long-term protection you need to stay in your home.
To learn more about how the bankruptcy laws in your state offer you the most protection, and to see which type of bankruptcy might be best for you, speak with a local bankruptcy attorney. Your local bankruptcy lawyer can answer your questions, and take you through the filing process, helping to ensure you get the maximum protection available.
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