Bankruptcy can help you save your home in several ways.
The first way is with the “automatic stay”. The short explanation is that once you file bankruptcy, the law stops all your creditors- including your mortgage company- from taking any collection action at all. This stops foreclosure, calls, repossession and every other form of collection. The down-side is that the automatic stay only lasts a few months. It will not be a long-term solution to your problem, but it could buy you time to find a long-term solution.
Another way bankruptcy can help you save your home is with a repayment plan just for mortgage arrears. In Chapter 13 bankruptcy, you can repay the arrears on your mortgage over a period of several years. For instance, if you owe $50,000 in arrears on your mortgage, and you do a Chapter 13 bankruptcy, you can pay that $50,000 in 60 monthly installments. However, you must stay current on mortgage payments in addition to making the monthly bankruptcy installment payments. So, consider this. If you could not keep up with your mortgage, how are you going to keep up in the future AND pay a bankruptcy payment every month? You might need an attorney to help you answer that question.
If you are filing Chapter 7 bankruptcy, there are two important opportunities when you can save your home and property.
The first opportunity is BEFORE you file bankruptcy.
If you have an excellent bankruptcy attorney, he or she will be able to tell you whether your house would be at risk. Your attorney will be able to advise you if there is a way to protect the house. Most importantly, a good attorney will be able to prevent you from blindly filing your bankruptcy and finding out if the house is not safe after it is too late.
The second opportunity is WHEN filing bankruptcy.
Assuming your house can be protected in bankruptcy, your attorney can ensure it is safe by taking the proper bankruptcy exemptions The bankruptcy exemptions are like an invisible shield that protects certain pieces of property during bankruptcy. The exemptions are different for different states.
The most important rule to remember is that you can never keep a house without paying for it. This is true whether you file bankruptcy or not. The only thing bankruptcy does is eliminate liability for a deficiency in the event that the property is sold at foreclosure. For example: Imagine that your house is worth $300,000 and you owe $350,000 on the mortgage. Your house is sold at foreclosure for $300,000. You are still on the hook to pay the balance of $50,000. If you had filed bankruptcy (and not reaffirmed the debt) you would not owe anything after the foreclosure.
Virtually all of this applies in the same way to cars.