The past couple years have been financially difficult for many homeowners in Louisiana. Sometimes, despite all your attempts you find yourself unable to pay your mortgage and are now facing foreclosure. This is very distressing, but sometimes bad things happen to good people. If you are facing foreclosure, you may wonder if there is any way to slow down the process or stop it altogether. One option that may be a good choice for you is filing for bankruptcy.
Wait, isn’t bankruptcy a last resort?
Bankruptcy does not have to be a last resort. In fact, there are many merits to filing for bankruptcy. One is that it can slow down or even stop the foreclosure process. When you file for bankruptcy, an “automatic stay” is placed on any collection proceedings including foreclosure. The automatic stay can slow down or stop the foreclosure process, at least for a time. The outcome of bankruptcy and foreclosure process depends in part on whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Foreclosure and Chapter 7 bankruptcy
A Chapter 7 bankruptcy filing is also referred to as a liquidation bankruptcy. In general, through a Chapter 7 bankruptcy your non-exempt assets will be sold by a bankruptcy trustee and the proceeds used to pay off your debts. After that, many (but not necessarily all) of your remaining debts will be discharged allowing you to move forward on a clean slate. When it comes to foreclosure, the Chapter 7 automatic stay will delay the process. However, it will not stop it entirely. Still, it may buy you the time needed to come current on your mortgage or find alternative housing. Note that the automatic stay can be lifted under certain circumstances allowing the foreclosure process to move forward.
Foreclosure and Chapter 13 bankruptcy
A Chapter 13 bankruptcy filing is also referred to as a wage-earner’s plan. In general, when you file for Chapter 13 bankruptcy you keep your assets. Instead, you will be placed under a court-approved three- to five-year repayment plan in which you make payments that go towards paying back your debts. At the end of the plan, many (but not necessarily all) of your remaining debts will be discharged, giving you a fresh financial start. If your home is in foreclosure, the automatic stay will stop the proceedings and through the repayment plan you can get caught up on what you own. Note that you still must be able to make your regular mortgage payments while making payments on your Chapter 13 repayment plan.
Bankruptcy can help
If you are in the weeds on your mortgage and are facing foreclosure, filing bankruptcy may be a good option to consider. A Chapter 7 bankruptcy can slow down the process while a Chapter 13 bankruptcy may stop the process entirely. Bankruptcy filings can be complex. You will want to make sure you understand all your legal options so you can decide whether filing for bankruptcy is right for you.