Owning your own home may be the American dream, but for many in the St. Petersburg area, 2020 brought with it many financial hardships that have been extended into 2021, including the possible foreclosure on their home. While some lenders may be able to work with homeowners to come up with a plan to modify their loan, many lenders are not willing to make such accommodations. When this happens, filing for bankruptcy may help.
How does bankruptcy differ from foreclosure?
While filing for bankruptcy or letting your home be foreclosed upon may seem equally bad, there are some differences between filing for bankruptcy and letting the bank foreclose on your home that make bankruptcy the better option.
First, when you file for bankruptcy, you are the one initiating the process. In comparison, in a foreclosure the lender initiates the process of repossessing and selling your home.
Second, if you file for bankruptcy there is a chance that you may be able to keep your home following the conclusion of the bankruptcy process under the right circumstances. If your home is foreclosed upon, you will certainly lose it.
Third, once your lender begins foreclosure proceedings, they will gain control over you home. However, if you file for bankruptcy, you will keep control over your home until the bankruptcy process is complete. This is due to the “automatic stay” that will be placed on foreclosure proceedings.
What is an automatic stay?
Whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, once filed the court will issue an “automatic stay.” This means that your creditors, including your home loan lender, must stop any and all collection proceedings. Thus, if your lender has already begun foreclosure proceedings, these proceedings must be postponed until the bankruptcy is finalized, unless the lender moves to lift the automatic stay or has filed advance notice of foreclosure.
Learn more about how filing for bankruptcy can help you
Bankruptcy has an undeserved negative stigma. However, for many homeowners, filing for bankruptcy is preferrable to losing their home to foreclosure. Ultimately, this post is for educational purposes only and does not offer legal advice. Those who want to learn more about how filing for bankruptcy can help them are encouraged to explore our firm’s website for further information.