People often look into debt consolidation or refinancing when they face financial hardship. They may rework their household budget to try to free up resources to pay all of their bills or even start working a second job. Bankruptcy may be the last option available to someone in a situation of significant financial hardship.
Filing for personal bankruptcy could prevent the garnishment of someone’s wages or allow them to protect the title to their home from a lawsuit that might lead to a lien. Often, the lender who helped finance the purchase of your home ends up being the creditor who poses the biggest threat to your homeownership.
After all, your house is the collateral for the loan, so if you miss payments, the mortgage company could eventually foreclose on your home to recover the money they paid on your behalf. Is a bankruptcy filing sufficient to protect you from foreclosure?
An automatic stay halts all collection activity
Aggressive collection activity is a leading cause of people filing. Individuals want the reprieve that the automatic stay that the courts grant will provide. Creditors will have to cease their collection efforts until the courts rule one way or the other on your bankruptcy filing.
In the meantime, you can avoid lawsuits and stop the aggressive phone calls. A bankruptcy can temporarily delay foreclosure hearings and give you a chance to catch up on your payments.
Chapter 13 bankruptcy could help resolve underlying issues
If the problem with your mortgage isn’t something you can resolve quickly, then you may need to consider Chapter 13 bankruptcy to help you renegotiate your financial obligations. Creditors including mortgage lenders cooperate with those filing a Chapter 13 bankruptcy as they renegotiate their debts and work out a monthly payment plan.
Your choice to file for Chapter 13 bankruptcy could motivate your lender to increase how long you have to repay your mortgage or make other changes to the terms of your loan that help you stay in compliance. Although you cannot simply discharge your mortgage and keep the home, you can protect your interest in the property and potentially improve the repayment terms for the loan with a timely bankruptcy filing.
Understanding how bankruptcy helps those facing mortgage issues can help you decide the best means of protecting one of your most valuable assets.