If you are struggling to pay your debt, including paying off your mortgage, one of the questions you may have is whether it is better to file for bankruptcy prior to having your home foreclosed upon or whether you should have your home foreclosed upon and then file bankruptcy. There are benefits to both options. Learning the benefits can help you determine which may be the better choice for your situation. Here are a few of the benefits associated with filing for bankruptcy prior to your home being foreclosed upon.
You Can Discharge Your Debts, Which May Help You Afford the Mortgage
One of the benefits associated with filing for bankruptcy prior to your home being foreclosed upon is that you can discharge all of your debts in bankruptcy. Some people are not sure if they can afford their mortgage or not, but upon filing for bankruptcy, you can see exactly which debts will be discharged, which will not be, and what your repayment plan amount will be. This can help you make an informed decision as to whether you can keep your home and afford the mortgage if you file for bankruptcy and wipe out or lower your other debt.
You Have Time to Weigh Alternative Options to Foreclosure
Another benefit associated for filing for bankruptcy is that it provides you with time to weigh alternative options to foreclosure. When you file for bankruptcy, an order is issued which prevents the lender from foreclosing on your home immediately. You typically have three to six months until foreclosure can move ahead. This gives you time to work with the lender and modify your mortgage so you can afford it or even sell or short sell your home.
You Can Buy Yourself a Few Months of Payment-Free Living
The final benefit to filing for bankruptcy prior to your home being foreclosed on is that you can buy yourself a few months of payment-free living. If you know you cannot afford the mortgage, you may have accepted the fact you will lose your home and have to move. However, moving is costly. If you have a high amount of debt, you may be struggling to come up with money for a down payment and moving costs. When you file for bankruptcy, a stay is issued which prevents your home from being foreclosed on right away. You can live in your home, payment-free, until the foreclosure process is allowed to continue. This gives you time to save for moving costs.
If you file for bankruptcy prior to a home being foreclosed upon, a stay is issued and no action can be taken to foreclose upon the home until the bankruptcy paperwork goes through. This gives you time to think about your options. If you are facing both bankruptcy and foreclosure, it is best to consult with a foreclosure bankruptcy attorney. They can discuss the benefits of filing for bankruptcy prior to your home being foreclosed on and the benefits of filing after your home has been foreclosed upon, helping you to determine which is legally the best option for you.