Can Bankruptcy Help Prevent a Home Foreclosure?

 Posted on August 03, 2023 in Foreclosure

For many homeowners in North Carolina, the possibility of foreclosure is a significant concern. People who have experienced financial difficulties may struggle to make mortgage payments while also covering other essential expenses. Missed payments could cause a mortgage lender to contact a homeowner and inform them that they could face penalties if they do not pay the amounts owed and any applicable late fees or other penalties. In these situations, the fear of losing a home and the stress of addressing financial issues can take a toll on a person’s emotional and mental well-being. For those who are facing a potential foreclosure, it is important to understand the options that may be available. One potential solution may involve filing for bankruptcy.

The Benefits of Filing for Bankruptcy

Bankruptcy is not something most people initially consider when facing foreclosure. They may be concerned that they will not qualify for debt relief or worry that they will be required to give up certain assets, including their home. However, bankruptcy can provide several benefits for those who are facing the threat of foreclosure, including:

• Automatic stay

  When a bankruptcy petition is filed in court, an automatic stay goes into effect immediately. This legally requires all creditors to stop any collection efforts, including foreclosure proceedings. The automatic stay can provide temporary relief from creditors while giving a homeowner time to determine what options they may have to address their outstanding debts and prevent a foreclosure.

• Protecting home equity

  Chapter 7 bankruptcy can allow for the discharge of unsecured debts such as credit card balances and medical bills. However, Chapter 7 may require a person to turn over some of their assets. Fortunately, exemptions will apply to certain assets, and some of the equity in a home may be exempted from liquidation. A bankruptcy lawyer can provide guidance on whether Chapter 7 bankruptcy may be an option that will allow a homeowner to receive relief from some of their debts so that they can continue making mortgage payments and retain ownership of their home.

• Making up missed mortgage payments

  Chapter 13 bankruptcy will often be the option used by homeowners who wish to avoid losing their homes. With this form of bankruptcy, a debtor will make ongoing payments toward a repayment plan for several years. In addition to paying off some unsecured debts, a repayment plan will allow a homeowner to catch up on missed mortgage payments over time. By doing so, they can prevent foreclosure by bringing their loan current and continuing to make regular monthly mortgage payments.

• Avoiding deficiency judgments

  In some cases, it may not be possible to prevent foreclosure. If a foreclosed property is sold at auction, and the purchase price does not cover the full amount owed on the mortgage, a lender may seek payment for the remaining balance. Filing for bankruptcy can eliminate the requirement to pay these types of deficiency judgments.

While bankruptcy certainly has its advantages, it is important for a homeowner to thoroughly evaluate their situation and consult with a qualified attorney to determine the options that are available. Every case is unique, and an experienced bankruptcy lawyer can help assess a person’s specific circumstances and guide them through the process of seeking relief from their debts and addressing related financial issues.

Contact Our Charlotte Foreclosure Defense Attorney

If foreclosure threatens your home in North Carolina, do not wait until it is too late. By contacting a Mecklenburg County bankruptcy lawyer, you can determine what steps you can take to avoid the loss of your home and receive relief from your debts. At Blossom Law PLLC, we understand the complexities of bankruptcy law and will work tirelessly to protect your rights and safeguard your assets as you address a foreclosure or other debt-related concerns. To schedule a free, no-obligation consultation, please contact us at 704-256-7766.