Choice Between Bankruptcy And A Foreclosure
When it comes to making the choice between bankruptcy and a foreclosure, many people are uncertain which route to take. You shouldn't think in terms of either/or in this situation, and you should realize that this is not a decision which can be made lightly. A foreclosure occurs when a mortgage lender is not paid its monthly payments. If the buyer wants to stop this action, he or she has to pay the lender of the mortgage. 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. Similarly, an individual may lose their home through foreclosure if they do not keep up with the monthly payments on their mortgage. Some people learn how to stop a foreclosure with a loan modification. Loan modification allows homeowners and lenders to change the terms of a loan in order to help the borrower stay in the home and avoid foreclosure. It is important to note that a loan modification is not a new mortgage. A loan modification is the renegotiation of an existing loan.
In some cases, you might experience debt so large that you can no longer pay your debt, and in this case, a legal action of bankruptcy might be filed. 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. Bankruptcy does not allow you to keep a home that is not paid for to the mortgage lender, and it will not stop foreclosure. While it cannot stop the action, bankruptcy can slow it down.
Even though it doesn't stop foreclosure, bankruptcy can also be beneficial in that it will allow a person additional time to make payments, or make it easier to pay the lender. Due to bankruptcy, mortgage lenders are required to stop their foreclosure action, and this gives a debtor extra time to raise the funds necessary 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. When filing a chapter 13 bankruptcy, a court mandated payment plan permits the debtor to spread out payments over a period of time, instead of forcing them to pay all at once.
What you must realize, of course, is that there are legal fees to pay for bankruptcy, and not everyone is eligible to file for bankruptcy in the first place. The legal costs and fees may be more than the amount needed to catch up and make current mortgage payments. If you find yourself in a situation where you think bankruptcy can stop or stall foreclosure, you should discuss it with a lawyer. Due to the complicated legal procedures involved in bankruptcy, it is definitely a procedure that you should not handle by yourself. Talk to a licensed lawyer in your area for more specific area that is outside of the scope of this general article.
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