Bankruptcy and protecting your home: Part I

Unfortunately, there are many people who, to no fault of their own, fall behind on home payments and ultimately face foreclosure. Whether you are having a hard time paying your mortgage due to a medical emergency, unexpected job loss or any other reason, it is important to remember that you may have many options available – including a possible loan modification and other debt relief alternatives.

However, one option that many people fail to consider is bankruptcy. In fact, bankruptcy is typically one of the most effective tools for protecting your home and fighting foreclosures.

For instance, once you file for bankruptcy, all debt collection actions against you will be automatically stayed (stopped), including foreclosure proceedings. So, at the very least, bankruptcy will give you the time you need to fully consider your options and possibly work out the best deal for you and your family. In addition, you can often use bankruptcy to discharge (eliminate) many other debts – including medical and credit card debt – which will free up funds that you can use to help pay your mortgage.

However, the form of bankruptcy you choose will depend on whether or not you believe you will ever be able to make mortgage payments. If you think you will be able to resume regular mortgage payments in the future, a Chapter 13 bankruptcy may be the best option. This typically involves a process in which you agree to a three- or five-year repayment plan – often at a reduced amount – and you get to keep your assets and home.

Ultimately, though, the bankruptcy process can be quite complex, which is why it is best to contact an experienced lawyer as soon as possible. After all, every situation is different, and a knowledgeable lawyer can help determine the best option for your situation. For example, even if you have already paid off your home, but have a large amount of other debt, you may still want to use bankruptcy. In fact, bankruptcy may be the best way to eliminate your other debt while at the same time protecting your entire home. Learn more in Part II.