If you’re facing foreclosure, you may be wondering whether declaring bankruptcy will help. While chapter 7 bankruptcy has the potential to stall foreclosure proceedings and chapter 13 may stop them altogether, there are no guarantees. Every scenario is different, and the best way to resolve your particular financial struggles will depend on the circumstances. For those facing foreclosure, though, the following information may prove useful. 

When Chapter 7 Can Help 

If your house is at risk of being foreclosed and you declare chapter 7 bankruptcy, it will enact an automatic stay, which essentially prevents creditors from taking any action against you. However, it’s not a permanent solution because mortgage lenders can request permission to override the stay. Even if the request is not granted, the foreclosure can continue once your debt has been discharged. In other words, if you want to keep the home, chapter 7 may not be the answer. 

If you want to avoid having both a bankruptcy and a foreclosure on your credit report, there are ways to surrender your home after the proceedings. For example, it may be possible to transfer the deed to the lender after the chapter 7 bankruptcy has been completed. You may also be able to sell the property and use the proceeds to pay off the mortgage to avoid foreclosure. 

When Chapter 13 Can Help 

It may be possible to stop foreclosure proceedings altogether by filing chapter 13 bankruptcy. Unlike chapter 7, which liquidates nonexempt assets to pay back creditors, chapter 13 requires petitioners to pay back what they owe. They do this by devising a manageable three to five-year repayment plan. As a result, they may be able to resolve any mortgage arrears that prompted the foreclosure in the first place. 

If you’re facing foreclosure, Greg Dunn, Bankruptcy and Debt Relief Attorney, is here to help. Practicing out of Honolulu since 1996, this seasoned lawyer has guided more than 12,000 petitions through the bankruptcy court. Those on Oahu have turned to him for help with filing chapter 7 bankruptcy, devising payment plans for chapter 13, fighting foreclosure proceedings, settling debts, and rebuilding credit. Call (808) 524-4529 to schedule a free initial consultation, then visit his website to see which documents to bring.