How Can Filing for Bankruptcy Prevent Home Foreclosure?

 Posted on February 08, 2022 in Bankruptcy

If you are a homeowner who is experiencing financial difficulties, the possibility of foreclosure is likely one of your largest concerns. If you default on your mortgage, your lender may begin foreclosure proceedings, and if you do not make up the missed payments, you could lose ownership of your home. Fortunately, there are multiple options available that may provide you with debt relief, including filing for bankruptcy. With the help of an attorney, you can determine the best way to proceed, and you can take steps to prevent foreclosure while regaining financial stability.

Addressing Foreclosure Through Chapter 7 or Chapter 13 Bankruptcy

The first thing to understand is that filing for bankruptcy will allow you to stop foreclosure proceedings. After a bankruptcy petition is filed, an automatic stay will be put in place that prevents creditors from taking any actions to enforce your obligations, including proceeding with lawsuits to recover debts, repossessing property, or foreclosing on your home. Taking action to file for bankruptcy as soon as you are aware of foreclosure proceedings will make sure you can address your debts and determine the best course of action to receive relief.

When you file for bankruptcy, you will have two options: Chapter 7 or Chapter 13. Chapter 7 will allow you to eliminate certain types of debts. While this is usually the best option for dealing with unsecured debts such as credit cards, discharging secured debts such as a home mortgage or auto loan will usually result in the loss of the property the debt was used to obtain. That is, if you choose to discharge your mortgage, your lender will be able to take possession of the property and evict you. If you choose not to include your mortgage in a Chapter 7 bankruptcy, you may be able to discharge other types of debts, freeing up money that will allow you to become current on your mortgage and continue making payments. However, when filing for Chapter 7, you may be required to turn over certain non-exempt assets. Fortunately, Texas provides an unlimited homestead exemption in most cases, meaning that the equity you own in your home will not be subject to liquidation in a Chapter 7 bankruptcy.

For many homeowners, Chapter 13 bankruptcy is the preferred option, since it will allow them to become current on their mortgage, continue making payments, and eliminate other types of debts. If you file for Chapter 13, a repayment plan will be created in which you will use your disposable income to pay off some of your debts over a period of three to five years. By making ongoing mortgage payments along with the payments in your repayment plan, you will be able to maintain ownership of your home. In fact, any missed mortgage payments or other expenses may be included in the repayment plan, allowing you to pay off these amounts by making affordable payments over multiple years. This option will allow you to cover your ongoing expenses and ensure that you will be able to regain financial stability in the future.

Contact Our San Antonio Foreclosure Defense Lawyer

At the Law Offices of Chance M. McGhee, we can help you understand your options for debt relief, and we will make sure you follow the correct steps when you file for bankruptcy. To get legal help with foreclosure and determine how you can avoid losing your home, contact our Kerrville bankruptcy attorney at 210-342-3400 and schedule your free consultation.

Sources:

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.41.htm#41.001

https://www.creditkarma.com/advice/i/chapter-13-bankruptcy-foreclosure