What You Should Know About Bankruptcy And Foreclosure

Posted on: 29 April 2016

If you are currently struggling financially, you might be at risk of foreclosure. When you go through foreclosure, you lose your home due to being behind on your mortgage payments. If you are also going to file for bankruptcy due to the same financial issues, it might actually be able to stall the foreclosure and help you turn things around before it is too late. Here are some things to know about bankruptcy and foreclosure.

You Need to File For Chapter 13

When you are in need of filing for bankruptcy due to being behind on your debt and mortgage payments, you need to file chapter 13. This is the type of personal bankruptcy where you use your current and future income to start paying off your most important debts. If you are approved for it, you will be able to come up with a plan that lets you start paying off your past due mortgage payments and stop calls from various creditors, including the mortgage lender. Keep in mind if you file for chapter 13 bankruptcy to avoid foreclosure of your house, you need to catch up on payments within a certain period of time. 

If you were to file for chapter 7 bankruptcy, there is a much higher risk of losing your assets, including your house, to pay off your debts.

You Have to Prove You Can Make Current Mortgage Payments

Bankruptcy does not simply get rid of all your mortgage payment debt and let you keep your house without continuing to pay for it. In order to be approved for this type of bankruptcy, you must have enough income to start paying off your debts, including your mortgage payments. While the required amount to earn each month varies based on your total debt, many courts will require you to at least have enough to afford the current mortgage payments. If you can show that you are able to pay mortgage payments on time and begin to start making smaller payments toward the past due amount you have, it may work in your favor.

You May Not Qualify For Bankruptcy

Before you assume you can avoid foreclosure or stall it by applying for bankruptcy, make sure you understand that you might not qualify for it. This unfortunately does happen to some people for a variety of reasons. The courts might decide your debt isn't a big enough problem compared to your income to warrant bankruptcy, or you may be denied chapter 13 because you don't have the finances needed to pay back some of your debts through monthly installments. This is why it is so important to hire a good attorney specializing in both bankruptcy and foreclosures.