Foreclosure is the process by which the lender reclaims your home. If you miss numerous payments in a row, they can start the foreclosure process, take possession of your house and sell it to a third party. This is how lenders protect their investment, hoping to recover the balance of your remaining loan by selling the property, while you lose your house.
One option to consider if you’re facing foreclosure is the benefit of an automatic stay. This takes effect when you file a bankruptcy case. All other financial actions against you—including the foreclosure—must stop until the bankruptcy has concluded. Since a bankruptcy case can take a few months, filing gives you additional time in your home before the lender can proceed with the foreclosure.
This is not a long-term solution
That said, some believe bankruptcy is a solution to foreclosure and can stop it permanently. This isn’t necessarily true. Once the bankruptcy case concludes, if you’re still behind on your mortgage, the foreclosure process can resume, as the court will lift the automatic stay.
Therefore, it’s important to focus on your financial future while going through bankruptcy. If you file for Chapter 7, can you liquidate assets and eliminate other debts to start making your mortgage payments on time again? If you get current on what you owe, the lender will stop the foreclosure. Or can you use Chapter 13 bankruptcy to consolidate your debt into a single monthly payment based on your income? This could also make your home far more affordable.
This financial process is complex, and it may help to work with an experienced legal team as you explore your options for a foreclosure defense.