Many Tallahassee residents get driven to exploring bankruptcy as an option for their financial woes because they have gotten behind in their house payments and are facing a foreclosure action in the near future. Not wanting to lose their home, these struggling families may see bankruptcy as the way to save it.
It is therefore important that these families understand what a Chapter 7 bankruptcy will, and will not, accomplish for them with respect to keeping their home. Like other types of bankruptcy, filing a Chapter 7 bankruptcy will trigger an automatic stay, meaning that a bank seeking to foreclose can take no further action until the bankruptcy is over or until it gets permission to continue with the foreclosure process.
However, if a person is behind in house payments, a Chapter 7 will not save the home in the long term. While the bankruptcy will protect the family from owing anything further on the mortgage loan, even if they are upside down in the mortgage, it does not stop the bank from, at the proper time, continuing with foreclosure and, ultimately, selling the home to pay off all or part of the outstanding loan.
Some families may simply choose to file a Chapter 7 anyway and hope that they will be able to catch up on payments or work something out directly with the bank. Others may want to consider exploring Chapter 13 bankruptcy as an alternative, since the Chapter 13 payment plan can allow a family to repay overdue mortgage bills over time.
Although personal bankruptcy can stop a foreclosure in the sense that there will almost always be some time in which a bank will not be able to sell the home in question, how long bankruptcy can protect a home is a question that depends on an individual's circumstances.