Do You Have to Wait for Your House to Go into Foreclosure Before Filing for Bankruptcy?
Fearing the loss of your home can involve indescribable stress and anxiety. Not knowing how to save your home, at what point bankruptcy should be filed or even whether you can save it can create confusion and panic. In many cases, however, your home can be saved during the bankruptcy process both before and after foreclosure proceedings are started.
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Foreclosure
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When you fail to pay your mortgage, the lender has the legal right to regain possession of the home. This process is known as foreclosure. Foreclosure is a legal process that must go through the courts before a lender can take the property. This process is often lengthy and occurs after you have received notices of pending foreclosure action.
Bankruptcy
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The bankruptcy process can stop or prevent a foreclosure. Bankruptcy allows you to regain control of your financial situation. The court does not look at what caused the problems to determine if you qualify for bankruptcy. The court reviews assets, income and expenses. Your outstanding debts are either erased or reduced.
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When to File Bankruptcy
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Bankruptcy should be filed once you find yourself facing insurmountable debt. You can and should file before foreclosure proceedings begin. Filing the bankruptcy before the foreclosure has started prevents the lender from proceeding one step further. Consulting with a bankruptcy attorney about your specific situation can help you determine the best time for filing. Most bankruptcy attorneys offer a free consult.
Keeping the House
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Your Trustee will determine whether you can keep your house. Check legalconsumer.com for the homestead allowance in your state (link found in resources section of this article). To be able to keep your home, your equity in the home should be under your state's homestead allowance. Your attorney will advise you of the laws and rules associated with keeping your home and help you through the process. It is important to keep up with your payments during the bankruptcy process. You will need to reaffirm your mortgage. The reaffirmation process involves contacting the lender and filling out the required paperwork.
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References
Resources
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