How Bankruptcy Can Help You Keep Your Home
Those who are facing foreclosure of their homes may find a solution through declaring bankruptcy.
Those in New Mexico who are facing foreclosure may feel that they are running out of options. When debts accumulate to the point that they cannot be paid off, sometimes the final stage for someone is the foreclosure of his or her home, if he or she has defaulted on the mortgage. This can be a difficult situation to manage, especially for those who have one family home. Once a lender begins the foreclosure process, the clock begins ticking for homeowners to either find ways to quickly pay off their debts, find themselves looking for somewhere else to live or in the worst case, winding up on the streets. However, there is a way for people who have defaulted on their loans to put a hold on the foreclosure process.
Bankruptcy can be a last-ditch escape
While filing for bankruptcy is a major decision that carries with it many more implications, it may be a way for people who have fallen deep into debt to keep their properties. This is first and foremost made possible by the “automatic stay” provision, which immediately pauses any foreclosure proceedings. This extra time period can provide an opportunity for debtors to pay off their mortgages. Whether or not this ends up leading to people being able to keep their homes depends on the path they choose to take and how they are able to act when filing.
Different bankruptcy paths
With Chapter 7 bankruptcy, which is available only to people who meet a certain income threshold, certain debts can be discharged, freeing up assets to pay off a mortgage. The downside to this is that the mortgage is still looming over the debtor’s head, so someone should only choose this option if he or she knows that with other debts discharged, it will definitely be possible to pay off his or her home. Chapter 13 bankruptcy, on the other hand, takes a longer time, but it allows debtors to work out a payment plan with their creditors, including a timeline and payment amounts that fit within their budgets. It may be the better option for people who don’t want to have any of their assets liquidated.
With either type of bankruptcy, one consequence is that it will affect the debtor’s credit score. The faster things can be paid off; the sooner people can get their credit back to solid ground. Those who are considering bankruptcy as a possible route to escape foreclosure may find it helpful to get a legal consultation. An attorney in the local area who practices bankruptcy law may be able to offer sound advice.