Many Cleveland, Tennessee, residents probably realize that they are in financial trouble, or at least understand fully how bad things have gotten, when they can no longer pay their mortgage.
Even the most patient of lenders will eventually start foreclosure proceedings once a person has missed some payments, and the thought of losing one’s home is scary on many levels.
People in such situations may naturally see personal bankruptcy as an option for preventing the foreclosure. It is important, though, that they understand what a bankruptcy can and cannot do to protect their home.
By virtue of the automatic stay that a person ordinarily gets upon filing a Chapter 7 or Chapter 13 bankruptcy, a lender must suspend its foreclosure activity upon getting notified of a person’s pending bankruptcy. This will give a family a little breathing room to sort things out financially.
However, it is important to note that if a person takes the Chapter 7 route, the bankruptcy will not ultimately stop the bank from foreclosing on the home. It will only prevent the bank from making collection efforts above and beyond taking and selling the house.
A Chapter 13, on the other hand, can be used both to keep up on one’s house payments and, as part of the bankruptcy’s payment plan, catch up on back payments. At the end of a successful Chapter 13, a debtor can avoid foreclosure altogether.
How to handle a mortgage that is in default is a question that depends heavily on one’s individual situation. It is a question that should be discussed carefully with one’s attorney.