When you are unable to make your monthly mortgage payments, the lender will eventually take action in order to claim what they are due. This typically marks the beginning of the foreclosure process in which the mortgage lender seeks to resell your home.
The threat of foreclosure can be terrifying when you are trying to get your finances in order, but you do have options that you can pursue. By filing for bankruptcy, an automatic stay will go into effect that may help you stop the foreclosure of your home.
How does the automatic stay prevent foreclosure?
The automatic stay issued by the bankruptcy court requires creditors to cease collection activities while you organize a repayment strategy. This includes a requirement for mortgage lenders to postpone foreclosure activities. Keep in mind that an automatic stay provides a temporary solution and that the foreclosure is likely to go through if you are still unable to pay your mortgage during and after the bankruptcy.
When will an automatic stay not go into effect?
An automatic stay through bankruptcy can provide a much-needed reprieve when foreclosure seems imminent, but there are circumstances when the automatic stay will not apply. This can occur when the bankruptcy court dismisses two or more bankruptcy cases within a one-year period or if the mortgage lender successfully contests the automatic stay.
In many cases, bankruptcy will put a halt on your home foreclosure by way of an automatic stay. This provides a chance to liquidate the necessary assets or build a plan for repaying your debts, but it is not a permanent solution that removes your payment obligations forever.