Can a bankruptcy help me save my home?

On Behalf of | Oct 19, 2021 | Bankruptcy |

Families in Mobile who get behind in their house payments are probably looking for some alternatives to losing their home.

Even if they are otherwise in okay shape financially, the family may consider filing for bankruptcy if only to be able to stay in their house. In many if not most cases, Alabama residents who are behind on their house payments are also having other financial problems.

Bankruptcy can buy a debtor some time and offer other protections

At a minimum, most debtors will be able to get the benefit of the automatic stay by filing for bankruptcy. The automatic stay requires all creditors, including banks and lending institutions, to stop all collection action.

This means that even if a foreclosure sale is pending, it will have to wait until after the bankruptcy is over or until the lender gets an order allowing it to proceed with a sale.

A debtor can use this valuable time to try to work something out with the bank or, at least, find another suitable home.

A Chapter 7 bankruptcy also offers some other benefits. With a discharge, a family will not have to worry about most other bothersome bills and payments.

The discharge also prevents the bank from taking additional steps, beyond foreclosure, to collect the debt. In other words, the debtor will be safe from garnishments, court hearings and other collection actions.

Chapter 7 bankruptcy has its limits

However, it is important for Alabama families to realize that a Chapter 7 bankruptcy ultimately cannot stop a bank from foreclosing once the bankruptcy is over.

Many lenders will simply wait out the bankruptcy and then go forward with legally taking and selling the home.

In these situations, a Chapter 13 bankruptcy may be a better option. If a debtor is able to get a payment plan approved and can stick to it, then he or she may be able to make catch up payments through the plan and save the home.