Comparing The Differences Between Choosing Bankruptcy Or Foreclosure

By Coby T. Lucas | March 26, 2009

Sometimes people have to choose between filing bankruptcy or letting their mortgage lender foreclose on their property. However, it is not as simple as a case of either /or and a decision cannot be made this easily. A mortgage lender will file a foreclosure action when it is not paid its monthly mortgage payments. The single method of stopping this from happening in to make the payment to the mortgage lender.

A mortgage loan can be compared to a car loan in the sense that if you don not pay it back, the car will be taken or repossessed by the bank. By not making the monthly mortgage payments you can ultimately wind up with the same fate of losing your house.

The definition of bankruptcy is to file legal paperwork to resolve an inability to pay debts. This action stops all civil proceedings against the debtor while the debtor is in bankruptcy. Therefore, according to law, the mortgage lender must stop all legal action (including foreclosure). But, a mortgage company can try for relief from the stay, and when it is allowed, just continue with the action mentioned earlier.

The bottom line is that bankruptcy does not stop foreclosure and it does not allow a debtor to keep a house without paying the mortgage lender. Bankruptcy only slows down the process and does not eliminate the situation.

Although filing bankruptcy can’t stop foreclosure, it provides an individual with additional time to repay a mortgage lender or facilitates paying the lender of the mortgage. The debtor and a short time in which to come up with the needed funds, because the lender must suspend foreclosure when the debtor has filed for bankruptcy. It is the last resort for any debtor to declare bankruptcy when he is totally unable to meet his creditors commitments. Under such circumstances, he may be discharged by some unsecured debts but under mortgage, he shall be prepare to repay the debt within the given time as the debt is secured by tangible assets.

Bankruptcy can allow a person to not have to make certain payments and, therefore, he might have enough extra money to make payments on his mortgage. A Chapter 13 bankruptcy doesn’t pay off all debts but instead sets up a more manageable payment plan for the debtor.

Not everyone qualifies for bankruptcy and Unfortunately if they do qualify, there are legal fees to pay. The legal costs and fees may be more than the amount needed to catch up and make current mortgage payments. If you think that bankruptcy may help you stop or avoid foreclosure, talk with a licensed lawyer. Bankruptcy is complicated enough that you need to hire a lawyer who knows what he or she is doing.

We have reproduced the general information in this article and if you have any queries of any sorts on this subject be sure to consult with a advocate licensed in your state.

Learn about how you can payoff your home loan in a third of the time with a mortgage checking account and avoid going through mortgage meltdown.

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