Financial struggles can often start out small, yet can quickly grow to the point of impacted many aspects of your life in Westland. One is your standing with your mortgage lender. If you fall too far behind on your monthly payments, your lender could try to foreclose on your home. Some might tell you that filing for personal bankruptcy is a surefire way to stop foreclosure proceedings. Yet is this really true?
It is if you file under the correct chapter. Most of those seeking bankruptcy protection look to file under Chapter 7, as debts can be discharged in such a case. Mortgage arrears can indeed be included among the debts that are discharged in a Chapter 7 case, but that might not necessarily prevent foreclosure.
Filing for bankruptcy initiates an automatic stay, meaning that any collection efforts being taken against you must cease. That includes foreclosure, but the caveat is that your lender retains the right to foreclose on your home. It can then ask the judge to allow the foreclosure to proceed once the stay is lifted. It can also choose to wait to initiate a foreclosure after your case is over (if your arrears are never settled).
A Chapter 13 bankruptcy (also called a wage-earner bankruptcy) may be the better option if you are trying to prevent foreclosure. In a Chapter 13 case, your debts are repaid over a 3-5 year period. According to the website for the Federal Judiciary, your mortgage arrears can be included in this plan. This ensures that they will be repaid, thus satisfying the demands of your lender.
It should be remembered that no matter which form of bankruptcy you file, you still need to continue to make your payments. Falling behind again could leave you facing the same conundrum.