You got your first foreclosure notice. It’s a position you never wanted to be in, but there’s just not enough money to pay the bills right now with your current debt load.
You’ve heard that bankruptcy can help you avoid foreclosure. Which type should you use: Chapter 7 or Chapter 13?
The good news is that filing for either type puts an automatic stay on the foreclosure. It cannot proceed until the bankruptcy filing is complete. This may only get you a few extra months, so don’t buy into the myth that your home is instantly saved. Many people believe that, but it’s simply not the case. The stay just pauses the foreclosure for a short time.
That said, completing the filing may save your home. The best option in most cases is to use Chapter 13 bankruptcy.
Under Chapter 13, you and all of your creditors hammer out a new payment plan. The goal is to pay off your debt, in monthly installments, over the next three to five years. This spreads out the debt that you already have and bundles it into one monthly payment, making it easier to fit that payment into your current budget.
If you want to save your home from foreclosure, you can consider that while making this new payment plan. If you don’t actually owe that much, that debt may become part of the repayment plan, or the repayment plan may get your monthly bills down so that you can afford the mortgage payments again.
Saving the home where your family lives is likely your main priority at this time. Make sure you know all of your legal options.
Source: Realty Trac, “Truth About Bankruptcy Foreclosure,” accessed March 01, 2018