If you’ve fallen behind on mortgage payments and exhausted all other options for financial assistance, filing for bankruptcy could be the solution. Certain aspects of bankruptcy law are designed to prevent homeowners from losing their properties. To learn more about this option, review this brief guide on the process. 

How Does Bankruptcy Help You Avoid Foreclosure?

Filing for bankruptcy could delay or prevent foreclosure by prompting the court to issue an automatic stay. This court order prevents all creditors from attempting to collect debts, which includes mortgage lenders. If the foreclosure process is already underway because you’ve missed several payments, it must be delayed for at least three months. 

If the mortgage company motions to lift the stay, the foreclosure process will still likely take at least six months to a year. This window should give you time to gather enough funds for any past mortgage payments you owe. 

The automatic stay doesn’t stop foreclosure from happening altogether. After the period has ended, mortgage lenders can still attempt to collect their debts or move forward with the process if you’re unable to pay. This is true even if you’ve qualified for bankruptcy. Fortunately, bankruptcy laws allow you to follow payment plans for creditors to help you achieve a better financial position. 

What Does the Filing Process Entail?

To help prevent foreclosure, file for Chapter 13 bankruptcy. Unlike Chapter 7, in which you liquidate assets, Chapter 13 is designed for people who can pay back some or all of their debts and thus keep their assets. 

You’ll need to prove that you have ample earnings to cover your mortgage and other basic expenses, such as utility bills and food. You’ll also need to submit an extra payment each month to repay the debts, but the repayment plan can be stretched over five years.

If you’re eligible for Chapter 13, start the process by filing a petition with the bankruptcy court in your jurisdiction. You’ll need to provide paperwork detailing all of your assets and debts, your current finances, and an income schedule. Many people who file for bankruptcy must also receive credit counseling. If the case is approved, it will be overseen by a trustee who ensures future payments are made on time.

Filing for bankruptcy can be an intricate and time-consuming process, and minor oversights or mistakes can delay the timeline. To ensure filings are completed properly the first time, turn to Steven P. Ciardiello, Esq. This bankruptcy law professional helps clients in Hamden, CT, regain their financial footing through experienced bankruptcy assistance. See the practice’s full list of services online, or call (203) 248-8000 to set up an appointment.