What is it?

To momentarily halt a foreclosure, even up to the day before an auction, especially when a homeowner has debts beyond their mortgage, bankruptcy might be the solution. It's a prevalent tactic to momentarily stave off foreclosure. During bankruptcy proceedings (Ch 7 & 13), a home cannot be sold, foreclosed, or auctioned.

Does it really work?

When homeowners fall behind on loan payments and face foreclosure, they sometimes resort to bankruptcy. If this occurs, the lender will seek permission from the bankruptcy court to resume foreclosure due to unpaid loans. Once approved, the protective stay from bankruptcy is lifted, and the property heads back to foreclosure and potentially auction. Therefore, while bankruptcy can effectively delay foreclosure, it's only a temporary measure.

Advantages and Disadvantages

Declaring bankruptcy can pause a home's auction, but it's not a long-term solution. It delays, rather than prevents, foreclosure and can lead to both bankruptcy and foreclosure marks on a credit report. Accumulating fees and overdue payments during bankruptcy increase the likelihood of eventual foreclosure. Short sales might be a better option for homeowners looking to alleviate financial burdens.

Unfortunately, many are not informed of this by bankruptcy attorneys and inaccurately view bankruptcy as the only option, risking dual financial hits. It's vital for homeowners to seek advice from real estate investment experts before making the significant decision of bankruptcy. Our team is ready to provide guidance on selling your home quickly to avoid foreclosure, regardless of financial circumstances.