Foreclosure vs. bankruptcy: How can you protect your home?

 Posted on June 20, 2024 in Home Ownership and Bankruptcy

Facing financial difficulties can be overwhelming, especially when your home is at risk. If you find yourself struggling to keep up with mortgage payments among other financial responsibilities, it is essential to know your options. Understanding how bankruptcy can defend against foreclosure can help you make the best possible solution for your situation.

What is foreclosure?

Foreclosure is a legal process where the lender takes control of your home due to your missed mortgage payments. This process can be stressful and can result in you losing your home. In Maryland, foreclosure can take several months, giving you some time to explore other options.

What is bankruptcy?

Bankruptcy is a legal process that helps you manage or eliminate your debts. There are several types of bankruptcy, but the two most common for homeowners are Chapter 7 and Chapter 13. Chapter 7 can discharge a significant part of your debts, but you might have to liquidate your house and other assets. Chapter 13, on the other hand, allows you to keep your home by restructuring your mortgage debts and payment arrangement.

How Chapter 13 bankruptcy can protect your home

Chapter 13 bankruptcy can be your lifeline when you are facing foreclosure. Under this type of bankruptcy, you can set up a repayment plan to address missed mortgage payments over three to five years. If you stick to the plan and consistently pay your mortgage, you can avoid foreclosure and stay in your home.

Moreover, when you file for bankruptcy, an automatic stay goes into effect. This means that all foreclosure actions must stop immediately. This pause gives you time to figure out your next steps and work on a repayment plan.

Protect your home through bankruptcy and legal support

Filing for bankruptcy can feel daunting, but it is a legal tool designed to help you get back on your feet. In this critical situation, seeking guidance from legal professionals can offer invaluable support. They can help you understand your options and guide you throughout the process.

Remember, you are not alone in this challenging circumstance. With the right information and support, you can make decisions that could help you move forward to a more financially stable and secure future.