With a bankruptcy filing, you can stop a foreclosure. For a time. However, before you file, you have to determine if you are going to use the bankruptcy to prevent the foreclosure and keep your home, or merely to prevent the lender from collecting the deficiency balance and any associated costs from the foreclosure, if you abandon the property.
If you decide to remain in your home, you need to develop a Chapter 13 plan that will enable you to pay for mortgage, any mortgage arrears, other secured debts, such as car loans, and necessary living expenses.
The advantage of the plan is that it allows you to pay your mortgage arrears over a five-year period, which can make them affordable. Nonetheless, you have to have income to cover all of these payments; otherwise, the trustee will move to dismiss your bankruptcy.
If you cannot make your plan work for your mortgage, you may have to consider abandoning your home. If you house is still considerably underwater, even with the recovery of the real estate market, it may not make economic sense to keep it.
In this case, a bankruptcy can provide the protection from your lender after they foreclose the property and resell it. Assuming they sell it for less than the outstanding balance of your mortgage, you could be responsible for that amount, even though you no longer live in the home.
A bankruptcy can discharge this deficiency balance and stop any collection efforts by the lender.
The decision to remain in your home is emotional and economic. While the heartstrings may tug, the pull of the purse strings should ultimately control your decision.
Credit.com, “How to Save Your Home from Foreclosure,” Gerri Detweiler, August 01, 2010
