How to Stop a Foreclosure - How Filing For Bankruptcy Can Help Save Your Home

With the growing financial crisis being experienced in the United States, more and more homeowners are now facing the harsh reality of losing their home as a result of a foreclosure. This is because with all the prices steadily rising resulting from the financial crisis, more and more homeowners are unable to meet their financial obligations which they have initially arranged when they took out a mortgage or a loan using their home as their form of collateral. While filing for bankruptcy can seem to be an extreme and drastic solution for many, it can be able to provide you the help you need to save your home and not lose it through a sale resulting from a foreclosure notice.

This is not to say that this is the best option for everyone dealing with a foreclosure notice that has been issued by a creditor, bank or the local court. But by learning more about filing for bankruptcy and foreclosures, you would be able to make the right decision.

Learning about Foreclosures

Next to receiving news of the death of a loved one through the mail, a foreclosure notice is perhaps the most dreaded and stressful experience any homeowner would need to face. Receiving a foreclosure notice is more than enough to bring a homeowner in a state of panic. This is because a notice of foreclosure would mean that the property that the homeowner had placed as a form of collateral on a mortgage or loan that was taken out would mean that the mortgaged property would then be seized by the creditor or financial institution in order to pay back the outstanding balance.

There are a number of different reasons why a foreclosure notice can be disseminated by the creditor or financial institution. The most common reason is the consecutive non-payment of the monthly fee of the monthly amortization that has been promised by the borrower to pay. Prior to the completion of the loan amount to be released, a certain amount is stipulated by the creditor or financial institution which the borrower would agree to pay in intervals. In some cases, a borrower may send in only a portion of the total amount that has been agreed upon. While it is true that the borrower has been able to send in a payment, the borrower had, in effect, still failed to meet his or her obligation as far as the terms of the promissory note or contract is concerned, causing the creditor or financial institution to still send out a notice of foreclosure.

Bankruptcy: A Viable Option?

Out of desperation on the part of many homeowners facing foreclosures on their mortgaged properties, one of the steps that they take in order to save their homes and other mortgaged properties from being seized is to file for bankruptcy. This is because when an individual files for bankruptcy, he or she declares that he or she no longer has the financial capacity to meet any of his or her financial obligations. As a result, people who have filed for bankruptcy are given more time to pay off their debts. This would then allow them more time to scour for the funds that they would need to in order to pay off the mortgage or loan that they have taken out using their home as their form of collateral on the mortgage.

While this form of arrangement is one of the reasons that make filing for bankruptcy a viable option to consider, it does have it share of drawbacks. For one thing, filing for bankruptcy would have a negative effect on your current credit standing and score. People who have filed for bankruptcy have found it extremely more difficult to take out a loan or a mortgage in the future, even if they have been able to regain their financial standing and have been considered as no longer bankrupt. This is because the record of the filing of bankruptcy stays in your credit record for up to 10 years. While you would be able to slowly rebuild your credit standing, having a record of bankruptcy can still be a significant barrier for your ability to take out loans and mortgages in the future.

Alternative Approach

The best thing to do when you have received a notice of foreclosure is to first meet with your creditor or the financial institution where you have taken out the loan or mortgage. These institutions are not greedy organizations who want to make you miserable. They are simply wanting to you to pay back the amount that you have borrowed as per the conditions of your promissory note with the interest agreed upon. Contrary to the common public belief, foreclosing a property does not do much benefit on the part of the creditor or financial institution. In fact, properties that have been seized as a result of the foreclosure notice actually sell for a very low price. More often than not, the amount that the creditor or financial institution will get from selling the seized mortgage property would not be sufficient to cover the outstanding balance you have with them, causing them to still incur loses. This being the case, your creditor or the financial institution where you have taken out the loan or mortgage from would be more than happy to assist you in making the necessary arrangements that would ensure them that you would be able to pay back the loaned or mortgaged amount with the stated interest while still allowing you to keep ownership of the mortgaged property.

If you are unable to meet an agreeable and workable arrangement with your creditor or financial institution, the next thing you could do is to ask around other creditors if they would be able to grant you a loan in order to pay off the mortgage or loan and prevent your property to be seized and foreclosed. This would work well, especially if you have paid more than half of the total amount of the loan or mortgage you have taken out. Apart from being able to pay off your existing loan or mortgage, the amount you would need to take out is relatively lower than the amount in your existing loan or mortgage. As such, the monthly amortization would be a lot lower than what you are currently paying, which would, in turn, be relatively a lot easier to pay back.

If all else have failed and filing for bankruptcy is the only option left for you, make sure that you select the right kind to file in order to make it easy on your part. There are two kinds of bankruptcies that are commonly filed by people facing a foreclosure notice. The first is the Chapter 13 Bankruptcy. This plan offers you up to five years to pay back all of your debts and financial obligations.

The second type of bankruptcy is the Chapter 7 Bankruptcy. Between the two, this is the more common type of bankruptcy filed by homeowners facing foreclosures. This is because there is no minimum amount to qualify for this. Another reason is that most people who filed for a Chapter 7 Bankruptcy are able to resolve their financial problems relatively faster than in the case of the Chapter 13. In many cases, the problems with regards to any threat of foreclosure are resolved in about six months. However, this is also the more severe way to deal with your foreclosure problem since the Chapter 7 Bankruptcy would often require you to liquidate all of your assets. To put it simply, any property or asset that has not been exempted from the bankruptcy proceedings would be sold off and the money would be used to pay back the amount you have loaned or mortgaged from the creditors or financial institution. On top of this, one would need a co-signor when filing a Chapter 7 Bankruptcy. This is to ensure that, in the event that the assets sold off are not sufficient to pay off your existing loans and mortgages, your co-signor would pay for the difference.