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Bankruptcy can temporarily halt a foreclosure

If you've heard that bankruptcy is a good way to put an end to foreclosure, the first thing you should know is that the automatic stay it puts on the foreclosure is just temporary. Filing for bankruptcy doesn't mean the foreclosure is over for good. It just means the bankruptcy case legally has to be finished first, so the foreclosure case has to wait.

Still, it can buy you a few months while you get your finances figured out. This can be valuable time for you and your family, and it can reduce the stress of the situation if you're worried about losing your home soon -- and you don't know where you'll go.

You can work to turn bankruptcy into a permanent fix, though. There are exemptions to help you keep your home, while eliminating some of your other debt. If you use Chapter 7, that means the debt is gone after assets are liquidated; if you use Chapter 13, you get an affordable repayment plan to deal with the debt in the next few years.

Either way, you have vastly improved your financial position. Without all of the other pressing debt to take care of, you can focus on making your mortgage payments every month. You may not have to lose the house after all. You just create a new budget based on your altered debt, catch up on what you owe, and make the payments on time going forward.

As you can see, there are ways to get out of foreclosure without losing your home. Bankruptcy is one tool that you can use. Understanding what options you have can dramatically change your plan of action.

Source: Realty Trac, "Truth About Bankruptcy Foreclosure," accessed Nov. 18, 2016

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