Saving Your Home from Foreclosure During Bankruptcy

For many people who are struggling to make ends meet, foreclosure becomes a serious risk. If you get too far behind on your mortgage payments, the bank may elect to foreclose on your home. If you hope to avoid foreclosure and save your home, then declaring bankruptcy may be a good option for you and your family.

Many people are hesitant to move forward with bankruptcy declarations. But the fact remains that bankruptcy is an excellent tool for people who, despite their best efforts, have otherwise been unable to get current on their debts. Learn more about how a dedicated Alabama bankruptcy lawyer at Padgett & Robertson could help you save your house from foreclosure when you call us at (251) 342-0264 for a free consultation.

Types of Bankruptcy

Did you know that there are multiple types of bankruptcy? Many people are quick to assume that declaring bankruptcy means that you are selling all of your assets and property in order to repay your creditors. There is an assumption that you are left with nothing to rebuild your life.

But in all actuality, there are several different types of bankruptcy declarations that may be a good fit for you depending on the details of your case. When you are attempting to save your home from foreclosure, there are two primary types of bankruptcy that may be relevant. They include Chapter 7 bankruptcy and Chapter 13 bankruptcy.

If your home is at risk for foreclosure, choosing the right type of bankruptcy declaration is going to be critical. If you go with the wrong type of bankruptcy, it could have an adverse impact on your ability to retain possession of your home. Here’s more about how Chapter 13 and Chapter 7 bankruptcy could have an impact on your ability to save your home from foreclosure.

Chapter 13 Bankruptcy

Declaring Chapter 13 bankruptcy may be your best option if you are hoping to avoid foreclosure. When you declare Chapter 13 bankruptcy, you have the opportunity to cure your debts, including the mortgage payments that you were behind.

By filing Chapter 13 bankruptcy, you’ll be able to formulate a repayment plan that allows you to get caught up on your mortgage payments, continue making current mortgage payments, and subsequently avoid foreclosure. Generally speaking, you will have approximately three to five years to make these payments on time and in full.

However, if you fail to meet the terms of your repayment plan, your home will once again be at risk for foreclosure. At the end of your repayment plan, as long as you have met the terms of your agreement, your mortgage will be up to date, your debts will be paid, and you will no longer be at risk for losing your home.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy may not be your best option if you hope to save your home from foreclosure. Chapter 7 bankruptcy Involves the sale of your property and assets in order to wipe out the majority of your dischargeable debts – although your home may be exempted.

Once your Chapter 7 bankruptcy declaration has been entered, an automatic stay will be issued. Here, your lender will be required to cease recovery attempts. But that will not stop your home from being foreclosed on.

Some people will not qualify for Chapter 7 bankruptcy declarations. This is, in part, because there are strict income limitations in place. The ability for you to retain possession of your home and avoid foreclosure will be dependent on whether you are behind on your mortgage payments when you declare bankruptcy.

If you are filing Chapter 7 bankruptcy and are current on your mortgage payments, you have a better chance of being able to avoid foreclosure on your home. Your home would be considered a non-dischargeable debt and could therefore be exempt from your bankruptcy estate. But if you are behind on your mortgage payments when you declare a Chapter 7 bankruptcy, you could reasonably expect the bank to foreclose on your home once your discharge is entered.

Meet With an Alabama Bankruptcy Attorney Today

If you hope to save your home from foreclosure, declaring bankruptcy may be the right option for you and your family. Although bankruptcy declarations often come with a stigma attached to them, they are often the ideal tool to help people who are otherwise struggling financially regain their footing and rebuild their lives.

For more information about how an experienced Alabama bankruptcy attorney at Padgett & Robertson can help you, schedule a no-cost, risk-free case review. You can reach us through our online contact form or by phone at (251) 342-0264 to get started.