How to Avoid A Foreclosure
Foreclosure and Bankruptcy are closely related to each other. Bankruptcy is a court procedure that helps businesses and individuals with their debts. It can either wipe away their debt or set up a repayment scheme. Foreclosure means that the mortgaging company repossesses the person’s property due to nonpayment of monthly fees.
Foreclosure and Bankruptcy can happen at the same time. What usually happens is that the person will file for bankruptcy so that their home will not be foreclosed. How does this happen?
1. When a homeowner is threatened with foreclosure, they will feel that they have run out of choices. The homeowner will receive a “Notice of Default” letter where they are threatened to lose their home if they still cannot afford to pay. Usually, homeowners receive this letter after owing 3 months of back payments. They have most likely run out of choices because no money is getting in and yet, they still want their house.
2. They might file for bankruptcy in order to preserve their home. Filing for bankruptcy can stop the foreclosure and safeguard the house temporarily. Filing for a chapter 7 bankruptcy places an “automatic stay” on your creditors. This is only a temporary solution.
3. An “automatic stay” can give you relief from unsecured lenders and will prevent them from pursuing against you. It does not protect you from secured lenders.
4. Creditors can apply for “relief from automatic stay”. This means that your “automatic stay” will be lifted so the creditors can now proceed with the foreclosure.
5. The advantage of filing for bankruptcy is that you can buy time to come up with the money so that you can get your house back.
Many people advise against filing for bankruptcy. Here are some reasons why:
1. Your record of foreclosure and bankruptcy will show up for a long time. Bankruptcy stays on your record for 10 years. Foreclosure stays for 7 years but it will look twice as bad.
2. The mortgage company can file for “relieve from automatic stay” and still end up foreclosing your house.
3. You would still eventually need to deal with the mortgage company and pay off debts in the future.
Foreclosure and Bankruptcy can ruin a lot of people’s lives and homes. They might creep up on you when you least expect it. It would be best if you could avoid foreclosure and bankruptcy at all costs because it will hurt your credit score.
