Filing bankruptcy stops the foreclosure process, but not necessarily permanently. When you file either a chapter 13 or chapter 7 bankruptcy, the court automatically issues an order known as the automatic stay. This court order notifies creditors to stop collection activities immediately.
Home Protection in Bankruptcy
Your mortgage protection varies by the type of bankruptcy you are filing. In chapter 13 you will work out a plan for back payments and keep your home, and a Chapter 7 bankruptcy can delay the foreclosure process for several months. In Chapter 7 you liquidate your assets and the mortgage holder takes back the home in exchange, cancels any remaining mortgage debt.
Option of Selling Your Home
Usually, a lender will start the foreclosure process after missing three or four payments. This gives you the time to try to sell your home or loan forbearance. If these actions aren’t an option for you, or you tried and failed you may want to file for bankruptcy.
Credit History Concerns
A foreclosure stays on your credit history for seven years while bankruptcy stays on for ten years. Neither one of these looks great on your credit history, but at least with bankruptcy, you get to keep your home providing you can make the payments once the process is over.
If you are facing foreclosure, bankruptcy may be a way to keep your house and allow you time to reorganize your finances. If you are at risk of losing your home, talk to a Cincinnati bankruptcy attorney to see what your options are and how to protect your assets.