Bankruptcy and Foreclosure

It is an unfortunate reality that bankruptcy and foreclosure often go hand in hand. When a homeowner is having serious financial problems, it is possible that he or she will fall behind on mortgage payments and eventually default on the loan. This may lead to foreclosure proceedings, wherein the lender essentially takes back the property in order to sell it and recoup its losses. It is important to remember that you may have various options in the face of threatened foreclosure or even if foreclosure proceedings have already begun. Bankruptcy is one such option to consider. When you file a bankruptcy petition, this will place an automatic stay on foreclosure proceedings. This may buy you much-needed time to work out an alternative to foreclosure, such as a short sale. Chapter 13 bankruptcy may even allow you to save your home.

What is foreclosure?
The basic definition of foreclosure is a process of repossessing a mortgaged property as a result of the borrower's failure to keep up on mortgage payments. With the recent recession and still struggling job and real estate markets, foreclosure is more common than it has ever been. Banks repossessed more than 1 million homes in 2010 alone, and 2.9 million households received a foreclosure filing that same year.

Stopping Foreclosure: Your Options
Though foreclosures are on the rise, homeowners have options to consider. The course of action you take should depend on various factors: whether you want to keep the property, your current financial situation and your long-term financial goals. Accordingly, you may consider bankruptcy as a way to place a temporary hold on foreclosure while you work out a plan of action. Chapter 13 bankruptcy may actually enable you to keep your home. You may wish to consider a deed in lieu of foreclosure or a short sale, where you would not keep the property but would avoid resorting to bankruptcy or having a foreclosure on your credit report.

Chapter 13 Bankruptcy and Foreclosure
Chapter 13 bankruptcy involves the reorganization of debt through a structured payment plan. One of the key benefits this type of bankruptcy has to offer a homeowner is the ability to include past due mortgage payments and penalties in the payment plan, meaning a homeowner who has fallen behind on his or her mortgage payments or who is facing foreclosure may be able to save his or her home.

Alternatives to Foreclosure
If you are faced with foreclosure and bankruptcy is not an option you wish to consider, you may have alternatives: loan modification, short sale or deed in lieu. With a loan modification, you and your lender will work out a modification of your mortgage loan. This can result in a significant reduction of your monthly payments. With a short sale, you will sell the property for less than it is worth (it is important to work out an agreement with the lender so you are not held liable for the difference). With a deed in lieu, you essentially surrender the property to the lender to avoid foreclosure.

Though foreclosure presents a frightening proposition to you and your family, you have specific options and legal rights. A skilled attorney can inform you of your options and can protect your rights in order to help you work out a resolution that is in your best interests.

Find a bankruptcy lawyerin your area who can address your foreclosure-related needs.