Here’s a question I, as a bankruptcy attorney, hear all the time: Does filing bankruptcy help avoid foreclosure? And here’s the answer: Yes and no. Filing a Chapter 7 bankruptcy triggers the “automatic stay” I’ve been writing about in former blogs. The stay is sort of a “time out” period for creditors, when no collection efforts can be made, and that includes foreclosing on a home. And, no, it’s not permanent. What the automatic stay does is buy time, time to take one of the following steps:
First, in the right circumstances, a debtor could “catch up” by bringing his house payments current, perhaps over a five-year period of time. Obviously, the homeowner needs to prove he or she is now in a position to resume regular payments. But, even if a Chapter 13 bankruptcy isn’t feasible, the bankruptcy automatic stay almost always buys time to strategize and plan, time to consider those four tactics I spoke about in an earlier blog: mortgage modification, repayment plan, deed in lieu of foreclosure, and short sale. And, almost always, the stay buys time to stop an immediate sale of the home, keeping the wolves at bay.
Having spent my entire career working on behalf of consumers and small business owners and helping them cope with financial challenges, I always come back to the same message. I say the same things to everyone I talk to about bankruptcy, whether I’m seeing people in my office in Columbus, Indiana, or whether it’s in Anderson, Bloomington, or Indianapolis: If finances are a serious challenge,
1. Face up to your situation. 2. Get help. 3. Get help early!