Stopping Foreclosure With Bankruptcy

Stopping foreclosure with bankruptcy is possible when you use one of two types of bankruptcy. And the type of bankruptcy you use depends on your situation.

First, the two types of bankruptcy that individuals use to stop foreclosure are known as Chapter 7 and Chapter 13. The Chapter 7 is known as a liquidation and the Chapter 13 is known as a payment plan.

If you have a lot of unsecured debts such as credit cards or medical bills, and are having a difficult time paying your monthly mortgage payments because of the unsecured debts, you may want to consider a Chapter 7 bankruptcy. With a Chapter 7 bankruptcy, property that is not exempt and in which you have equity is sold and the net proceeds are distributed to your creditors. This is normally not as bad as it may sound because in many cases, most of a debtor's property is exempt. By disposing of unsecured debts and allowing you not to pay them, a Chapter 7 bankruptcy may make it easier for you to pay your monthly mortgage payments.

It needs to be pointed out that you must qualify for a Chapter 7 bankruptcy and not everyone qualifies.

If you are a couple of months behind on your mortgage payments and just need time to "catch up", you may want to consider a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, you have a payment plan which is approved by the bankruptcy court. In the plan you pay your monthly mortgage payments, but you can also have between 3 and 5 years to pay the "catch up" amount. This may make it easier for you to pay the arrearage on your mortgage.

With both the Chapter 7 and the Chapter 13, there is an automatic stay which temporarily stops foreclosure actions. Depending on your situation, your intentions, and your mortgage lenders' actions, the stay may be lifted (removed) and your creditor may be able to continue with the foreclosure. It all varies case to case.

Additionally, with both a Chapter 7 and a Chapter 13, you will need to have paid your most recent past year's taxes and you will need to go to credit debt counseling.

Bankruptcy is detailed and can be complicated. If you think that it may help you, be sure to talk with a lawyer.

This is general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

Stop! Don't blindly chase any option to stop foreclosure. See stop foreclosure options to learn what options you have in your situation. Remember, what works in one person's situation, may or may not work in your situation to stop, avoid, and prevent foreclosure.

For more general information, see Stop Foreclosure - Five Options You Need To Know. For more detailed information see bankruptcy vs foreclosure.

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