File Bankruptcy Before or After Foreclosure?
If you're struggling to make mortgage payments and are in danger of losing your home to mortgage foreclosure, you probably have questions about how and whether filing for personal bankruptcy may be able to help you. One common question people have when faced with this situation is whether to file bankruptcy before or after foreclosure.
Each situation is unique, and your decision to file bankruptcy when facing foreclosure may depend on a number of factors. If you'd like to speak directly with a bankruptcy lawyer about your situation, please fill out this form. You can arrange a free, no-obligation initial consultation today.
Should You File Bankruptcy before or after Foreclosure?
The answer to this question depends on a couple of factors, including your income level, your plans for life after bankruptcy, and which type of bankruptcy you plan to file. Here's a look at what you can expect from a variety of scenarios.
- If you want to try to keep your house: If you need time to catch up on mortgage payments but have reason to believe that, once you do so, you'll be able to keep up on payments and get back on track to pay off your mortgage loan, you may want to consider filing for Chapter 13 bankruptcy. This type of personal bankruptcy lasts three to five years, during which time the automatic stay protects filers from all collection actions (including foreclosure) and filers have a chance to catch up on past-due debts with the help of a repayment plan. In this situation, it could make sense to file your bankruptcy case before your lender forecloses on the property.
- If you need time to make alternate living arrangements: Even if you don't think you'll be able to make up lost ground on your mortgage, Chapter 13 bankruptcy may help you by offering you some breathing room. During the time that your case is active, you may be able to find alternate housing without the pressure of meeting a foreclosure deadline. Again, filing bankruptcy before foreclosure here could likely make the most sense.
- If you have little or no income and don't plan on keeping your house: If you aren't earning enough money to keep current on your mortgage payments and other debts, you may benefit from a Chapter 7 bankruptcy, which does not require filers to make monthly payments to their creditors. In fact, in order to qualify for Chapter 7 bankruptcy, you have to show that your income falls within certain limits. If you file your bankruptcy case before the foreclosure is complete, you may be able to cancel any debts associated with your mortgage (though you'll have to give up your house).
Talk with a Lawyer about When to File Bankruptcy
In most cases, filing bankruptcy before your home has been foreclosed on may make the most sense. But this means that you'll have to file your petition with the court before your lender files the foreclosure paperwork. If your bank has already set the foreclosure in motion, you may only be able to temporarily halt it with a bankruptcy.
To learn more about your individual circumstances, take advantage of this offer to speak with a bankruptcy lawyer near you for a free consultation.