Filing Bankruptcy Won’t Always Stop Foreclosure on your Home, But for Many, it’s the Best Option.

Before discussing the various legal options available to postpone or prevent foreclosure in California, let’s define the term. Simply put, foreclosure becomes likely when a homeowner falls behind on their mortgage payments. The more behind they become, the more likely a foreclosure will take place.

It’s a situation that can take some distressed homeowners by surprise, because, like most western states, the Golden State has a “non-judicial” foreclosure system. This means that without any court intervention, a foreclosure trustee can send a series of legal notices to the homeowner, and then subsequently foreclose on the property. You can lose your home without ever appearing in a courtroom.

And, once this non-judicial foreclosure sale takes place, the homeowner loses most legal rights to the property and his former home is transferred back to the lender or to a third-party purchaser.

Even if your financial situation seems dire, foreclosure isn’t always inevitable. For many homeowners, filing for bankruptcy is the best option. Bankruptcy won’t always stop foreclosure on your home, but it will delay it.

Homeowners frequently wonder whether filing for Chapter 7 or Chapter 13 Bankruptcy will prevent foreclosure on their homes. While the answer is more complicated than a simple “yes” or “no,” filing a petition for bankruptcy will at least stop foreclosure on your home once the petition is filed.

However, this reprieve should be viewed as more of a “stay of execution,” rather than a “full pardon.” Chapter 7 bankruptcy will stop foreclosure once it’s filed. It is somewhat common for a homeowner to file chapter 7 bankruptcy right before their scheduled foreclosure sale date (within a few days), in order to stop the foreclosure. This allows the owner and the parties involved to pursue other options while the owner stays in his or her home, avoiding foreclosure for a period of time, usually three months.

So Chapter 7 isn’t a permanent solution, but rather a “lifeline” that gives you time to pursue other options, including loan modification, deed in lieu of foreclosure, or a short sale of your home.

It’s a steeper climb and harder to qualify for, but if you DO qualify for a Chapter 13 filing and complete all the requirements of the court, you can avoid foreclosure permanently. With a Chapter 13 filing, the homeowner presents a repayment plan to the court and creditors for approval and must show substantial and reliable income. The filing buys you time to catch up on all back payments over five years, and, after you’ve checked off all the challenging requirements, will prevent foreclosure on your most prized possession, your home.

To prevent foreclosure in Southern California, don’t go it alone. This article only skims the basics of using a bankruptcy filing to avoid foreclosure. So, if a difficult financial situation has you staring down the barrel of foreclosure, don’t hesitate, consider calling McFarlin LLP Southern California bankruptcy attorneys today. We’re happy to speak to you in more detail about your foreclosure situation at no initial charge.

Call us today at (888) 728-0044. Our attorneys can help you analyze your financial situation as it relates to bankruptcy and foreclosure proceedings and then walk you through the process of filing a Chapter 7 or Chapter 13 bankruptcy in time to delay foreclosure or perhaps avoid it completely. Courtesy of ApricotLaw.

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Category: Bankruptcy