Which Is Better Bankruptcy or Foreclosure?
by Reese Evans Some people think about the decision to file bankruptcy or simply allow the mortgage lender to start foreclosure. It can't be presumed...
Some people think about the decision to file bankruptcy or simply allow the mortgage lender to start foreclosure. It can’t be presumed to be a simple case of either/or as a verdict is not possible and cannot be made this easily. If you don’t pay your mortgage, the lender can initiate foreclosure proceedings. The only way of changing this is to make the payment to the mortgage lender. A mortgage loan is sort of like a car loan and if a person does not pay his car payment, his car will be repossessed. The rule is same for all and is applicable to any person not paying his mortgage payments – they will have to forgo the residence through foreclosure.
A legal action filed by somebody who is unable to pay his debts is called as bankruptcy. If the debtor is in bankruptcy then all the civil proceedings to collect debts are stopped. A mortgage lender must stop all legal actions, including foreclosure proceedings. The mortgage lender can apply for relief from the automatic stay. When it is granted, then the lender can proceed with the foreclosure. Declaring bankruptcy will not halt foreclosure and you still must repay your loan. Bankruptcy may make your financial problems easier to handle, but it will not make them completely go away.
Bankruptcy can help give a person the needed time, and sometimes make it easier to pay their mortgage lender. It will not, however, stop foreclosure should they still not be able to pay. Because of the fact that in a situation of bankruptcy, a mortgage lender will have to suspend a foreclosure action, the debtor has some time to raise the money and catch up. Discharging unsecured debts through bankruptcy may enable you to have more money to pay the mortgage payments.
If you’ve looked at all other options, don’t just give up your home. Consider filing bankruptcy and give yourself a chance to pay back your debts – on your time schedule. A Chapter 13 bankruptcy is a court ordered payment plan and allows a debtor to pay the mortgage catch up amount over a period of time.
Sadly, not every person will be eligible for bankruptcy, and even if they are found eligible, there are still legal costs that will need to be paid. The legal costs and fees may be more than the amount needed to catch up and make current mortgage payments. If you are thinking that declaring bankruptcy may benefit your situation and help you get out of a foreclosure, a good lawyer should be able to answer your questions. Bankruptcy is so detailed that you should not try to handle it by yourself.
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