Advantages of Declaring Bankruptcy over Foreclosure

Posted by Mydaytonaattorney on January 27th, 2015

If you have fallen behind on your mortgage payments and your lender is not open to a loan modification or a short sale, you have to prepare for the worst. Your bank may start the foreclosure process soon, repossessing your home and selling it at a public auction. But don’t lose hope. You still have an option to stop the foreclosure sale—and that is to declare bankruptcy. Contact a qualified Daytona Bankruptcy attorney immediately so you can get advice on whether declaring a bankruptcy can help you stop an impending foreclosure.

Delaying Foreclosure with a Bankruptcy

When used correctly, bankruptcy can become a useful tool that may let you keep your house. Once you file a Chapter 7 or Chapter 13 bankruptcy, the court issues what is called an ‘Order for Relief’ that grants you an automatic stay, directing your lender to stop any collection attempt immediately. Any scheduled foreclosure will be postponed, therefore, until your bankruptcy is completed which buys you precious time. It gives you about three months to sort things out.

Note, however, that the lender can file a Motion to Lift the Stay. If the motion is granted, then you won’t receive extras much time to straighten out your finances.

Using a Chapter 13 Bankruptcy to Stop Foreclosure

If you file a Chapter 13, you bind yourself to a repayment plan to settle past due payments or arrearages. As long as you make the required payments through the repayment plan period, you can avoid foreclosure and stay in your home. Chapter 13 is also helpful if you would like to modify your mortgage payments and have been unsuccessful otherwise working with your lender.

Using a Chapter 7 Bankruptcy to Stop Foreclosure

A Chapter 7 bankruptcy can strip mortgages and home equity loans, and even forgives homeowners for tax liabilities for losses the lender incurs because of the default. Talk to an attorney to know if you may be eligible.

A Chapter 7 can be better than having foreclosure on your credit report. Both foreclosure and bankruptcy can damage your credit, but often, filing bankruptcy is the better choice if you are looking to rebuild your credit scores. A foreclosure damages your credit score and still leaves you with a huge mortgage debt. This makes it hard to secure any future mortgage. In contrast, a bankruptcy essentially gives you a fresh start.

Even though you can't always keep your property, bankruptcy can save you from mortgage debts and tax liabilities. You are debt free, so can immediately start rebuilding good credit, get back on your feet, and save some money.

About the company:

The Law Offices of Justin McMurray, P.A. is dedicated to helping the people of Daytona Beach, FL with all of their bankruptcy and foreclosure defense needs. Since 2008 the Law Offices of Justin McMurray have use their experience with Florida law to protect your rights and aggressively fight for you.