Can Bankruptcy Stop Foreclosure ?
Before deciding whether bankruptcy is the right way to stop an impending foreclosure, it is important to understand what bankruptcy is. Bankruptcy is a legal process that is designed to protect a person (or a business) from his creditors when he is unable to meet his financial obligations. |
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Any creditor, who forces the bankrupt person to pay his dues, is crossing all legal boundaries, and the creditor is punishable by law. However, bankruptcy is an expensive procedure and appropriate papers have to be filed properly in the court. When a person files for bankruptcy, a trustee is appointed to dispose his assets and clear all pending dues. Once the proceedings of bankruptcy are finished, the borrower is no longer liable to anyone.
Bankruptcy can be a suitable procedure if a person is facing extreme financial hardships. Even in case of a foreclosure, it should be used as a last resort. In case the creditor is demanding complete payment or threatening to foreclose the property, then most people are left with no choice but to file for bankruptcy.
However, there are other options like applying for mortgage assistance with HUD. Some lenders are willing to wait if HUD takes time to review your mortgage file. If bankruptcy is filed for, before the foreclosure date is announced, the foreclosure is stopped with immediate effect. Basically, foreclosure cannot take place when a person files for bankruptcy.
Under Chapter 13 or Chapter 7, a person can make regular monthly payments within a reasonable time frame to clear his debts. Nevertheless, filing for bankruptcy is an expensive procedure, and has its own repercussions that a person should be prepared to accept.
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