Becoming a homeowner is a cornerstone of the modern American dream. People want to establish equity in their own homes instead of paying the bills of a landlord. They may work hard on improving the home by making repairs. They may also spend as much as a third of their monthly income on their mortgage every month.
All it takes is a sudden job loss or similar financial setback to put all of a homeowner’s hard work and sacrifices at risk. Mortgage lenders may eventually try to foreclose on a property when an owner falls behind on their payments. Foreclosure means the loss of the home. People may have a very hard time qualifying for another mortgage in the years following a foreclosure. It is often crucial for those trying to improve their circumstances to avoid foreclosure whenever possible. Personal bankruptcy is one of several solutions people employ to avoid foreclosure.
How can a personal bankruptcy help people prevent foreclosure on their primary residences?
Delaying foreclosure hearings
Those who are on the edge of foreclosure may file for bankruptcy as a temporary protective measure. The courts issue an automatic stay when individuals file for bankruptcy. An automatic stay requires the temporary cessation of all collection activity. The brief respite granted by a bankruptcy filing can give a homeowner an opportunity to plan a path forward when foreclosure is on the horizon.
Providing leverage for negotiations
Those struggling to keep up with their mortgages may benefit from changing the terms of the mortgage. Particularly during a Chapter 13 bankruptcy, a lender may find it beneficial to cooperate with the homeowner instead of insisting on maintaining the status quo for the mortgage. People may be able to increase their repayment period and decrease their monthly payments. They may be able to move missed payments to the end of the mortgage so that they don’t have to come up with thousands of dollars all at once. Modifying a mortgage can improve someone’s chances of keeping the loan in good standing in the future.
Allowing for a more effective budget
Filers can eliminate eligible financial obligations that may have put stress on their household budgets. Getting rid of medical debts and high credit card balances can make it much easier to establish a sustainable monthly household budget. The elimination of certain financial responsibilities through bankruptcy can help people reliably make their mortgage payments after they complete the bankruptcy process.
Getting assistance as soon as foreclosure looks like a realistic concern can help homeowners protect their valuable assets using the resources available to them. A personal bankruptcy filing can be invaluable for those worried about losing their homes to foreclosure.
