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Difference Between Bankruptcy And Foreclosure
By editor | July 12, 2008
Filing for bankruptcy can be a severe step, and if you find yourself in that situation, you may wonder if you should not instead just allow the mortgage lender to go ahead with the foreclosure. This is not a decision which can be made easily, and is really not an either/or case. Monthly mortgage payments must be paid on time every month,or the mortgage lender will file an action of foreclosure. Paying the lender is the only true way this action can be prevented. A mortgage loan is sort of like a car loan and if a person does not pay his car payment, he will lose the car through repossession. If a person does not make their mortgage payments, they face the loss of their home through foreclosure.
Bankruptcy is a legal action filed by someone who cannot pay his debts. This action stops all civil proceedings against the debtor while the debtor is in bankruptcy. As a result, the mortgage lender is incapable of immediately continuing their foreclosure, or any other legal action. On the other hand, a mortgage lender can get around this by filing for a relief from automatic stay and proceeding with their action once the stay has been granted. Essentially, bankruptcy will not stop foreclosure, and will not allow anyone to keep a home without paying the lender. Slowing down the legal process is all that bankruptcy can achieve.
Occasionally, however, foreclosure is prevented through bankruptcy, as the latter gives person additional time in which to pay the lender and usually makes the paying easier. Since bankruptcy requires a mortgage lender to suspend a foreclosure action, a debtor has a little time to raise the money to pay the lender. Also, since bankruptcy can discharge some unsecured debts, a debtor may have more money with which to pay his mortgage payments. In terms of a chapter 13 bankruptcy, the courts will dictate that the payment of the overdue mortgage needs to be paid through several payments, which will further give the debtor time to pay the lender off.
Legal fees accompany anyone who does indeed find themselves eligible for bankruptcy, which isn’t everyone. In many cases, the legal bills may be more than the amount necessary to catch up on the mortgage payments that the debtor owes. It is imperative to talk over bankruptcy with a knowledgeable lawyer if you are going to attempt to stop foreclosure. Bankruptcy is so detailed that you should not try to handle it by yourself. While it is hopeful that this article has helped you in some way, you will find far more detailed information through conversing with a lawyer local to your state.
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