If you're falling behind on mortgage payments and worried about foreclosure, you're not alone. Many homeowners feel trapped, unsure whether they have any real options to keep their homes.
At Checkett, Pauly, Bay & Morgan, LLC in Carthage, Missouri, we work with individuals and families who are trying to stop foreclosure, and in some cases, bankruptcy can provide an important solution.
Filing for bankruptcy may give you time to get back on your feet and offer legal protection against foreclosure. An experienced bankruptcy attorney can guide you through this difficult decision and help you evaluate your best options. Keep reading to learn how bankruptcy might stop foreclosure and whether it's the right move for your situation.
How Bankruptcy Stops Foreclosure
When someone files for bankruptcy, an automatic stay is issued immediately by the court. This legal protection stops creditors from collecting debts, including starting or continuing foreclosure proceedings. For many, this pause is the first step in regaining control.
The automatic stay doesn’t eliminate debt or permanently stop foreclosure on its own. It simply gives you a breathing period while your case is reviewed. During this time, a bankruptcy attorney can help you evaluate how to handle mortgage arrears and other debts moving forward.
Once the stay is in place, your next steps depend on the type of bankruptcy you file, which we’ll look at next.
What Happens in Chapter 7 Bankruptcy
Chapter 7 is often called “liquidation bankruptcy,” but many people misunderstand what this means. In most cases, you don’t lose everything. Some property, including your home, may be protected by state exemptions depending on its value and equity.
When you file Chapter 7, the foreclosure process is temporarily halted. However, unless you can catch up on missed payments quickly, the lender may ask the court to lift the stay and proceed with foreclosure. A bankruptcy attorney can explain whether Chapter 7 makes sense based on your mortgage status and other debts.
If your goal is to keep your home long-term, Chapter 13 bankruptcy might offer a better path forward.
How Chapter 13 Can Help You Keep Your Home
Chapter 13 bankruptcy is designed to help individuals reorganize debt and pay it back over time. If you’ve fallen behind on your mortgage but still have steady income, this type of bankruptcy may help you keep your home while catching up on what you owe.
Before filing, it’s important to understand how this process works. Some important points to consider include:
Structured repayment plan: You'll make monthly payments to a court-appointed trustee, who then pays your creditors, including your mortgage lender. This plan usually lasts three to five years.
Mortgage arrears are included: Past-due mortgage payments are part of the repayment plan, allowing you to bring your loan current without needing to pay everything at once.
You must stay current on new payments: While you're paying off the arrears, you’ll also need to stay current on your ongoing mortgage payments or risk foreclosure restarting.
Working with a bankruptcy attorney during Chapter 13 is crucial. They can help you build a realistic repayment plan and represent you throughout the process.
Having the right legal guidance can make a big difference during such a stressful time. Your attorney can help you avoid mistakes and make informed decisions. Even with the right help, it's important to be aware that bankruptcy isn’t your only choice.
Exploring Non-Bankruptcy Options
Not everyone wants to file bankruptcy, and in some situations, it may not be the best option. There are alternatives to consider that may allow you to avoid foreclosure without entering bankruptcy at all.
Some of the more common foreclosure alternatives include:
Loan modification: You may be able to change the terms of your loan, such as extending the payment period or lowering the interest rate.
Short sale: If your home is worth less than what you owe, a short sale allows you to sell it with the lender’s permission and avoid foreclosure.
Deed in lieu of foreclosure: By transferring ownership of the property back to the lender voluntarily, you may avoid a formal foreclosure on your record.
These options each have their own pros and cons. A bankruptcy attorney can help you weigh them against filing for Chapter 7 or Chapter 13.
You should also be prepared for how bankruptcy will affect your finances beyond your home.
Long-Term Financial Impact of Bankruptcy
Bankruptcy stays on your credit report for several years, but it also gives you a chance to rebuild. While it may seem like a setback, many people find they can start improving their credit soon after completing their bankruptcy.
Some key factors to think about include:
Your credit score will drop: Bankruptcy can lower your credit score significantly, but many people already have low scores when they file.
You can still rebuild: After discharge, you can begin rebuilding credit with secured credit cards, small loans, or by making timely payments on remaining debts.
You may be able to buy a home again: With steady income and improved credit, some people qualify for a new mortgage just a few years after bankruptcy.
A bankruptcy attorney can help you understand how your choices today might affect your credit in the future.
Now let’s take a closer look at how timing plays a key role in stopping foreclosure through bankruptcy.
Timing Is Everything in Foreclosure Cases
Waiting too long to act can limit your options. Once a foreclosure sale has been scheduled, it becomes harder to stop the process. Filing for bankruptcy before that point usually offers the most protection.
The earlier you speak with a bankruptcy attorney, the more flexibility you have in choosing a strategy. If you wait until the last minute, you may lose access to repayment plans or legal protections that might have worked earlier.
Timing can also affect your ability to use Chapter 13 effectively, especially if you're already deep into the foreclosure process. Being proactive gives you the best chance of keeping your home.
If you're unsure about when or how to take the next step, there are a few key warning signs to watch out for.
Signs That You May Need to Consider Bankruptcy
Knowing when to take action is half the battle. If you’re seeing signs that foreclosure is coming, speaking with a bankruptcy attorney right away could help you avoid losing your home.
Some signs that may mean it’s time to consider bankruptcy include:
You’ve missed multiple mortgage payments: Falling more than 90 days behind puts you at serious risk of foreclosure.
You’ve received a foreclosure notice: If your lender has started the foreclosure process, your time to act is limited.
You’re relying on credit to cover basic expenses: Using credit cards to pay for groceries or utilities often signals deeper financial trouble.
A bankruptcy attorney can help you figure out whether bankruptcy is right for you and what steps you can take immediately.
For those who choose to file, it’s helpful to know what to expect after bankruptcy and how to move forward.
What Happens After Bankruptcy Is Filed
Once your bankruptcy is filed, the court will assign a trustee to review your case. From there, the process will depend on the chapter you file and your specific financial situation.
In Chapter 7, your non-exempt assets may be sold to repay creditors. Most people keep their primary residence, especially if there’s little equity. The foreclosure process may resume after your case closes unless you've managed to resolve the arrears.
In Chapter 13, you’ll begin making payments to the trustee under your approved repayment plan. If you stay on schedule and keep up with your mortgage payments, you can keep your home and emerge from bankruptcy with a clean slate.
Your bankruptcy attorney will guide you through this process and help make sure everything goes as smoothly as possible.
Take Control of Your Financial Future
If you're behind on mortgage payments and worried about losing your home, don't wait to get help. At our firm, we serve clients throughout Carthage, Missouri. To find out what bankruptcy can do for you, contact Checkett, Pauly, Bay & Morgan, LLC today to speak with an experienced bankruptcy attorney who can help you take the next step.
