How Bankruptcy Can be Your Best Defense Against Foreclosure

Key in a lock with a keychain shaped like a house.

Foreclosure is the process in which a creditor or lender attempts the forced sale of one’s home when they become unable to pay their debts. The home is taken as collateral, and once it is sold, the money is used to pay off any outstanding debts. When consumers are threatened with foreclosure, it can be highly stressful and overwhelming. What many people do not know, however, is that bankruptcy has the capability to stop foreclosures and save their homes.

How to Stop Creditors

The way in which bankruptcy is able to halt creditors is by “automatic stay.” It goes into effect as soon as the bankruptcy papers are filed, and lasts for the duration of the bankruptcy process. It makes it illegal for any of your creditors or lenders to take any collection acts against you, including the foreclosure of your home.

Though automatic stay can stop a foreclosure before it happens, in theory, it only stalls it temporarily. The bankruptcy process itself is what can permanently stop a foreclosure from taking away your home.

How Bankruptcy Stops Foreclosures

The best-suited chapter to stop a foreclosure is Chapter 13. It is the chapter of bankruptcy that does require you to liquidate any of your assets, such as your home, in order to pay off your debts.

The court will help you develop a personalized payment plan that will reorganize your debts in order to pay them off over a 3-5 year period. It allows debts that require immediate payment to satisfy, i.e. your mortgage loans, and extends the time you have to pay them over the life of the bankruptcy.

This allows you to not only keep your home, but also gives you the opportunity to pay off your debt to keep creditors away in the future. The only way this is truly possible is if you are able to maintain constant payments on your plan.

Contact Our New York Bankruptcy Team Today

Struggling with your finances is difficult enough. When you have creditors coming for your home, it can only overwhelm you further. We are committed to finding the best possible solution to help you find the financial freedom you deserve.

If you are being threatened with foreclosure due to your debts, contact us today through our website or give us a call at (917) 909-6166 to find out how we can be of service.

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