Many homeowners don’t want to face foreclosure. When they fail to pay for their mortgages for at least 4 months, homeowners are faced with foreclosure. Some lenders will be open to negotiations but there are other lenders who refuse to give better payment terms. This situation calls that the individual files for bankruptcy which could give them ample time to look for another place to live in or they can be given the chance to pay for the debts they owe.

Foreclosure will just be delayed once bankruptcy is filed. Filing for chapter 7 or chapter 13 bankruptcy will give the homeowners a breathing space from their creditors. Once bankruptcy is filed, the creditors no longer have the capability to harass and even communicate with the debtor. This will give opportunity to the debtor to study his/her financial situation and think of what can be done with the given situation. Foreclosure will just be postponed until bankruptcy court gives a decision.

Lenders still have the right to file for petition to lift the bankruptcy case. If the bankruptcy court agreed to have the case lifted, the debtor will be given a few months to look for another place before the house will be sold.

Chapter 13 bankruptcy can be filed if the homeowner has regular and sufficient income to pay themortgage and catch up on past mortgage payments. The homeowner will be paying for the monthlymortgage and the monthly payment for chapter 13 bankruptcy. No foreclosure action will be made when chapter 13 bankruptcy is filed. The payment will be made through bankruptcy trustee who will monitor the homeowner’s compliance in following the court orders for his/her bankruptcy case. Once the homeowner fails to pay for the agreed monthly payment, the lender can file a petition to continue the foreclosure.

Chapter 7 bankruptcy is filed by homeowners who can’t afford the monthly payment. This is filed to give time for the debtor to look for another place to stay. Once the homeowner leaves the property, their financial liability is eliminated giving the debtor a chance to a fresh start.

Bankruptcy in foreclosure is an option that debtors can consider but it should be their last resort since filing for bankruptcy can greatly affect credit ratings.

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Chapter 7, 11, and 13 Bankruptcies

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