The bankruptcy process is a tool that can possibly help struggling homeowners fend off foreclosure. There are different ways that the bankruptcy process may serve to help in circumstances of foreclosure that struggling homeowners should be familiar with.
The automatic stay
One way that the bankruptcy process may be able to serve as a resource to help with foreclosure is the automatic stay. The automatic stay goes into place once the filing party has filed for bankruptcy protection. It prevents creditor collection actions during the bankruptcy process. It does not matter which type of personal bankruptcy protection the struggling homeowner files for because the automatic stay applies in all types of bankruptcy.
The automatic stay is official when the bankruptcy court issues an order of relief which will apply during the bankruptcy process which is typically three to four months. There are a couple of exceptions including if the lender files a motion to lift the stay or if the foreclosure notice has already been filed prior to the order of relief being issued.
Chapter 13 bankruptcy help with foreclosure
Chapter 13 bankruptcy may provide more long-term relief for the struggling homeowner. It allows the filing party to set up a repayment plan which can include repayment of past-due mortgage payments which can allow the homeowner to get caught up. Chapter 7 bankruptcy may also be able to provide some relief. When a family home is on the line, it is essential for those considering filing bankruptcy for relief to understand the different options available, how they work and how they may be able to help them keep their home.