Can Bankruptcy Save Your Home From Foreclosure?

Will Bankruptcy be Able to Protect Your Home From Foreclosure?

The short answer is that saving a home from foreclosure depends on a number of factors. As the debtor (the person filing bankruptcy) is generally substantially behind in house payments, Chapter 7 will not be of any help as discussed below. Chapter 13 is probably the best bet for the debtor to save the home. Whether the home can be saved depends on a number of factors, such as the following:

  • Is the home worth saving?
  • Is the home underwater or does it have equity?
  • Is a loan modification necessary to save the home?
  • Is there a second mortgage on the home that can be eliminated?
  • How secure is the debtor's income?
  • Can the debtor pay back the past-due mortgage payments over 60 months if all other non-essential debts are removed?

Can Chapter 7 Save Your Home From Foreclosure?

Generally no. The reason for this is because a debtor with a home in foreclosure is generally substantially behind in payments and Chapter 7 does not provide time for the debtor to make up past-due mortgage payments. In order to complete Chapter 7 and keep the home, Chapter 7 requires that the loan be current. If the debtor is unable to bring the loan current, either through negotiation or payment to the lender, the home will be foreclosed by the lender. Sometimes, a debtor may be able to save the home from foreclosure in Chapter 7 if the lender agrees to a loan modification. However, obtaining a loan modification is rare at this time and debtors should not rely on being able to obtain a loan modification during Chapter 7. Most homeowners who want to keep their home look to Chapter 13. If you would like to learn more about what Chapter 13 can do for you, click here. If you want to learn more about the Chapter 7 process, click here. If you would like to learn more about what Chapter 7 can do for you, click here.


Can Chapter 13 Save Your Home From Foreclosure?

Maybe. Chapter 13 provides a debtor with excellent strategies to keep and save a home from foreclosure. For example, Chapter 13 allows a debtor to eliminate a second mortgage completely, thereby leaving only the first mortgage due and payable on the home. For many homeowners, removing a second mortgage provides the homeowner with an affordable house payment. Additionally, Chapter 13 removes the debtor's financial obligation to pay debts such as credit cards, personal loans, medical bills, and even some taxes. Removing such debts further increases the debtor's available cash to make the house payment.

Another strategy in Chapter 13 to help the debtor keep the home is the ability to make up past-due house payments over 60 months. Again, if a second mortgage has been eliminated, only the past-due payments on the first mortgage need to be repaid.

Chapter 13 has many traps for the unwary, so before planning to file a Chapter 13 bankruptcy, make sure to sit down with an experienced bankruptcy attorney that can guide you through the Chapter 13 process. If you want to learn more about the Chapter 13 process, click here.

If You Have More Questions


Please contact us if you have more questions or are ready to move forward and start the process of becoming debt-free. Remember, we are here to help you resolve your debt problems, so call us now!

(949) 954-7568