How To Avoid Foreclosure Through Bankruptcy?

It is not easy for anyone to face foreclosures, but at the same time, it is important to note that you may still have several defense options, which you can use to save your home. For example, you can even avoid foreclosure through bankruptcy. Though in the first instance it does not sound to be a very great idea, sometimes this is the best option that you might have. If you choose to go for it, there is a set procedure that you will have to follow. Following is a brief rundown on it.

File The Petition For Bankruptcy

The first step is to file your bankruptcy petition. You can either do it on your own or get help from an experienced bankruptcy attorney who is duly licensed to handle such cases in your state.

Automatic Stay

As soon as the petition is filed, an automatic stay is imposed by the court, which means none of your lenders, including the mortgage company, can make any attempt to collect their debts. This way, even if the home is already scheduled for foreclosure, the lender will have to postpone the date until a final judgment comes from the court regarding your case.

Declare Your Home As A Homestead

As you can see, just by filing your petition, you can easily avoid foreclosure through bankruptcy. But, this automatic stay is not going to be there forever. Therefore, you will have to act accordingly. The next step is to declare that you want to avail the homestead exemption for your home. However, in most cases the exemption limit is not high enough to protect your home. It is possible that the bankruptcy trustee appointed for your case will sell the home and then pay you the exemption amount in cash. So, after making your declaration, you will also have to work on strategies to save your home.

Negotiate A Reaffirmation Agreement

It is very important for you to keep in mind that when the trustee sells your home as part of the bankruptcy process, it turns out to be a big loss for the mortgage lenders also. Where you lose your home, the mortgage company loses a lot of money as they are also paid less than what they had actually lent to you. Therefore, the last thing you have to do to avoid foreclosure through bankruptcy is to contact your mortgage lender and negotiate a reaffirmation agreement with them. As part of this agreement, you agree to continue with your mortgage payments so that you can keep your home with you. The lender is very much likely to accept your offer, which means you will now enter into a new loan agreement, where you will just have to continue making the payments to keep your home.

But, always remember, bankruptcy must be used as the last option. Go ahead and avoid foreclosure through bankruptcy only if there is no better alternative available to you.

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