You miss a mortgage payment, and you start worrying about foreclosure. You mention to one of your friends that you are concerned that you may lose your home in the future. You know that the foreclosure process takes time, so you will not immediately lose your house after missing just a single payment, but it seems like you are heading in that direction.
To your surprise, your friend tells you that there is an easy solution: Just file for bankruptcy. Doing so stops the foreclosure case, so you get to keep your house. Is it really that simple?
The pause is only temporary
Filing for bankruptcy does not stop your foreclosure, but it does pause the case. This happens because of something known as an automatic stay. Essentially, the court wants other financial cases to wait until the bankruptcy case has concluded. The automatic stay puts those other cases on hold.
But after bankruptcy, the automatic will be lifted. Your lender could begin trying to foreclose on your home once again. Filing for bankruptcy may only buy you a few months.
The key, then, is to focus on how the bankruptcy can help you get current on your mortgage again. Maybe you can use Chapter 7 to liquidate some of your assets, pay off other debts and free up enough money in your monthly budget to start paying the mortgage. Or maybe you can use Chapter 13 to consolidate your debt into an affordable monthly payment, making it so that you can still afford your house.
In this sense, bankruptcy is certainly a tool that you can use when confronted with a foreclosure. Just be sure you know exactly how it works and what steps to take at this time.
