While foreclosure and bankruptcy are often confused or lumped together, they are not the same. You should remember that these are two different legal processes. However, sometimes they can work in tandem for your best interests. To get the best possible outcome, you will need an attorney experienced in both bankruptcy and foreclosure proceedings. Not every attorney can handle both cases, so you must use the right one.
Foreclosure relates directly to your home or property and your mortgage lender. This process allows your mortgage lender to collect on their loan or take your home when you have become highly delinquent on your payments. Foreclosure means that you may lose your home and any other property deemed fit by the court. It is often the last step your mortgage lender takes when attempting to collect a debt. Once in their possession, they will sell your home or property to recoup some of the money you owe them.
Bankruptcy is unlike foreclosure in that the debtor/borrower is the one who chooses whether and when to file. An individual or business can file for bankruptcy to discharge debts or create a personal reorganization to restructure their debt. Filing for bankruptcy gives you the opportunity to have a financial fresh start. However, it can adversely affect your credit profile and prevent you from obtaining certain loans for up to 4 years. For that reason, you should consult with an attorney to weigh the pros and cons.
When you decide to file for bankruptcy, your lawyer can help you choose which chapter will work best for you. A Chapter 7 Bankruptcy can cancel most debts, but you have to meet certain criteria to qualify. It will temporarily stop your foreclosure, but only for a few months. A Chapter 13 Bankruptcy gives you the option to restructure and reduce your debt, as long as you can show that your monthly payment is feasible. Chapter 13 Bankruptcy provides you with several options with regard to foreclosure that are not available in Chapter 7. You should discuss your options with your bankruptcy and foreclosure attorney. Many people will attempt to file the bankruptcy case on their own, but that is a big mistake as you may make a small error on your filing that results in a huge problem, perhaps even making your situation worse.
The short answer is yes. Bankruptcy can and does stop foreclosure proceedings, but for how long depends on what you do in your bankruptcy case. Regardless, bankruptcy can create a much needed time cushion for you to reevaluate your options and either save your home or leave on your own terms.
If you are facing foreclosure and are considering filing for bankruptcy, timing is everything. It will also depend on what you are trying to do with your home. Depending on your circumstances, filing for bankruptcy may be beneficial before or after your foreclosure proceedings. You should discuss your goals and circumstances with your attorney to formulate the best strategy.
If you consider filing before foreclosure, you should consider whether you are attempting to get a loan modification. Filing for bankruptcy before foreclosure will put an automatic stay and pause the foreclosure. This can give you more time to decide what you will do with the home. The moment the bankruptcy has been approved or denied, the stay ends, and the foreclosure process may resume. Obtaining a bankruptcy discharge may also relieve you of your debt service payments, thus helping you qualify for a loan modification.
If you need a bankruptcy attorney or a foreclosure lawyer, you should look no further than The Law Offices of Emil Fleysher, P.A. Contact us online or call us at 888-886-0020 for a free consultation. We can guide you in the right direction when you are facing foreclosure and trying to decide if filing for bankruptcy is a viable option.