Can Bankruptcy Help You Avoid Foreclosure in Texas?

 Posted on November 07, 2023 in Foreclosure

Facing home foreclosure can be emotionally and financially devastating. If you have fallen behind on mortgage payments, you may be wondering - can filing for bankruptcy stop the foreclosure process and let you keep your home? A Texas lawyer could likely provide some ways to keep you in your home, depending on your specific circumstances.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to restructure debts like mortgage arrears over three to five years. You will make monthly payments to a trustee who disperses payment to creditors. A Chapter 13 bankruptcy will halt a foreclosure while you get caught up on payments through your repayment plan. But staying current on the plan is essential. If you default, the lender can resume foreclosure proceedings.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy liquidates your assets to pay back creditors. However, Texas has “homestead exemptions” that allow you to keep your primary home. To qualify, you must pass a means test showing limited disposable income. Filing Chapter 7 will stop foreclosure temporarily. But if you cannot negotiate an alternative repayment schedule with your lender, they can eventually seize your home.

Weigh the Pros and Cons

While bankruptcy can postpone foreclosure, it has serious credit consequences that linger. Your credit score can drop 200+ points. And the foreclosure will still damage your credit once the bankruptcy concludes. Factor in the bankruptcy filing costs of around $1,500. Plus, a Chapter 13 repayment plan leaves less income available for living and other debts. For these reasons, bankruptcy offers only temporary protection. The primary advantage is the time it takes to get your finances in order.

Alternatives to Consider

Before deciding if bankruptcy is your best option, explore alternatives like:

• Mortgage modification - Rework loan terms with your lender
• Payment plan - Repay missed amounts over 12+ months
• Short sale - Sell and settle mortgage for less than you owe
• Deed in lieu - Voluntarily deed property to the lender

While not ideal, these options let you avoid foreclosure without the long-term credit damage of bankruptcy.

Contact a Kerrville, TX Bankruptcy Lawyer

Losing your home is painful. Before making any decisions, consult a San Antonio, TX bankruptcy attorney and housing counselor. They can help you understand all your options and guide you toward the solution that makes the most financial sense long-term. With the proper support, there are ways to get back on steady ground. Call Law Offices of Chance M. McGhee at 210-342-3400 for a free consultation.