If you are at risk for home foreclosure and are unable to obtain a loan workout plan, bankruptcy may stall or avoid foreclosure with an automatic stay. The stay postpones the sale of a home while bankruptcy is pending. However, a lender may be able to obtain a motion to lift the stay from the bankruptcy court. If your foreclosure notice was issued before you were in bankruptcy, the automatic stay will not stop the clock.
The Chapter 7 bankruptcy effect on your mortgage is dependent on several factors, including the amount of equity you have in the home and how much your state’s laws allow you to keep. Contact an attorney in your state to clearly understand your specific circumstances. Once the Chapter 7 bankruptcy is discharged, the lender is still able to foreclose on your home if you do not make your payments and keep them current.
Chapter 13 bankruptcy enables you to pay off late and unpaid mortgage payments during the repayment plan. You will need to continue to make your mortgage payments. If you make all the payments up to the end of the repayment plan, you can avoid foreclosure and keep your home. This may or may not include second mortgages or home equity loans, depending on your individual situation. Consult with an attorney about your specific circumstances.