The best way to avoid foreclosure when you are behind on a mortgage payment is to work out a new payment plan with your lender or refinance the loan as soon as possible. However, even when your lender finds your loan in default and begins foreclosure proceedings, there are options such as bankruptcy that can help you stay in your home.
Generally, lenders have two basic options to foreclose on your home: judicial foreclosure and nonjudicial foreclosure. In judicial foreclosure, lenders go through the court system to sell your property at a Sheriff Sale as a means to satisfy your mortgage debt. In states that permit nonjudicial foreclosure, lenders do not use a Court sale process but rather use a private sale procedure authorized by state law. Judicial foreclosure is the only option available to lenders in Pennsylvania. Bankruptcy can help you save your home in the following ways:
- When you file for bankruptcy, there is an automatic stay that stops creditors from continuing foreclosure proceedings, as well as collection actions, against you for the duration of the bankruptcy proceeding. This does not stop foreclosure proceedings entirely, but your lender must either wait until after bankruptcy to restart the foreclosure process or seek to have the automatic stay lifted by the court, a process that can take months. Because bankruptcy proceedings often conclude within 150 days of filing, your debts may be discharged before the lender lifts the stay and is able to sell your home.
- If you file for Chapter 13 bankruptcy, you can use your Chapter 13 plan to cure a payment default on your mortgage. In addition, you may be able to obtain a discharge of second and third mortgages, giving you an opportunity to make retaining your home more affordable.
Whether bankruptcy is the best foreclosure defense method for you depends on your circumstances. A seasoned bankruptcy attorney helps you evaluate your debt relief options to help meet your goals, including protecting your home for as long as possible.