Foreclosure vs Bankruptcy – AVOIDING A FORECLOSURE
You have received a Notice of Default or a Lis Pendens – either way the lender has initiated a foreclosure against you. Many people think that they will file bankruptcy and that will wipe out any debts including the foreclosure. But the STAY of the foreclosure is only temporary!
Chapter 7 bankruptcy never permanently stops a foreclosure. It does NOT discharge debts such as taxes, child support, alimony or student loans, not secured creditors (YOUR LENDER) whose debt is secured by your home.
The automatic stay is only as effective as long as the courts wants it to stay in place. At any point the court can grant your lender’s motion for “relief from the automatic stay” which allows the foreclosure to proceed.
Alternatively, you can file Chapter 13- a way to save your home from foreclosure. Chapter 13 allows you to sit down with your creditors and arrange a payment plan to pay back what you owe over a given amount of time on a payment schedule. Once accepted, creditors must abide by the workout plan. Not everyone qualifies fyi. Furthermore, to stay out of foreclosure you must continue to make the agreed upon payments until the debt is paid off.