Can Filing Bankruptcy Save Your Home from Foreclosure?
Falling behind on mortgage payments can leave you feeling helpless, especially if foreclosure looms on the horizon. Fortunately, filing for bankruptcy in Kansas or Missouri can be a powerful tool to stop foreclosure and give you time to regain control of your finances.
This guide explains how bankruptcy—particularly Chapter 7 and Chapter 13—can help you protect your home and achieve a fresh financial start.
How Does Bankruptcy Help with Foreclosure?
When you file for bankruptcy, an automatic stay goes into effect immediately (with a few exceptions for repeat filers). This legal protection forces creditors, including mortgage companies, to pause all collection activities, including foreclosure proceedings.
What Is the Automatic Stay?
- Stops foreclosure actions, as long as your home hasn’t been sold at auction or sheriff’s sale.
- Prevents creditors from pursuing legal actions or demanding payment during your bankruptcy case.
- Provides a critical window of time to address your financial situation.
Bankruptcy Options to Save Your Home
1. Chapter 7 Bankruptcy: Temporary Relief
A Chapter 7 bankruptcy can temporarily delay foreclosure, but it may not be a permanent solution unless you can catch up on missed mortgage payments.
- What Chapter 7 Does:
- Halts foreclosure temporarily through the automatic stay.
- Eliminates liability for unsecured debts, freeing up resources to pay your mortgage.
- Limitations:
- Once your bankruptcy case closes (usually within 90-120 days), the mortgage lender can resume foreclosure unless you’ve caught up on payments. The creditor might also choose to file a motion to lift the automatic stay during the case if mortgage payments are not being made.
- If you’re unable to catch up, you may choose to surrender the property and discharge the mortgage debt.
2. Chapter 13 Bankruptcy: Long-Term Solutions
Chapter 13 bankruptcy offers a more robust solution for homeowners behind on their mortgage. Through a structured repayment plan, you can catch up on arrears over time while keeping your home.
- What Chapter 13 Does:
- Stops foreclosure with the automatic stay.
- Allows you to repay missed mortgage payments over 3-5 years.
- Helps you manage other debts, making it easier to stay current on your mortgage.
- How It Works:
- Your repayment plan divides your mortgage arrears into manageable monthly payments.
- You’ll need to make both your regular monthly mortgage payments and the payment toward arrears.
- Key Considerations:
- Your repayment plan amount is based on your disposable income after covering essential expenses.
- You must maintain ongoing mortgage payments throughout the repayment period.
Which Bankruptcy Option Is Right for You?
Choosing between Chapter 7 and Chapter 13 depends on your financial circumstances and long-term goals:
- If you need short-term relief while deciding your next steps, Chapter 7 may be appropriate.
- If you’re committed to saving your home and can afford a repayment plan, Chapter 13 is likely the better choice.
Next Steps: Discuss Your Options with a Bankruptcy Attorney
Facing foreclosure can feel overwhelming, but you don’t have to navigate it alone. Our experienced Kansas City bankruptcy attorneys can help you evaluate your options and develop a plan to save your home.
Schedule a consultation today to get personalized advice in a casual, judgment-free environment. Let’s work together to protect your home and secure your financial future.
Questions to Consider:
- Are you struggling to catch up on missed mortgage payments?
- How would stopping foreclosure give you peace of mind?
- What financial goals would you achieve with a fresh start?
