You miss a mortgage payment, and you know that you’re now in danger of foreclosure. You certainly don’t want to lose your home, but maybe things are out of your control. For instance, perhaps you recently lost your job or had a medical emergency, and that’s why you weren’t able to cover the mortgage.
What you’re wondering is if you should declare bankruptcy already. Maybe you’ve heard that bankruptcy creates an automatic stay, which essentially pauses a foreclosure case. Maybe you’re just looking for a way to get your finances back in order. Should you file after missing just one payment?
Has your lender started foreclosure proceedings?
One thing to consider is that your lender would rather that you get caught up on your mortgage payments. They don’t want to start a foreclosure unless they feel like you’re not going to pay them the money that you borrowed. In an ideal world, you’d simply get caught back up on the payments and then stay current in the future, and they wouldn’t have to foreclose at all.
However, it’s true that this can be very difficult to do. The amount that you owe tends to increase over time due to different fees and the interest that you have to pay.
So, it’s likely that your lender will start the foreclosure process over a single missed payment. It usually takes a few months of missed payments before they will begin, and then it can take months for the foreclosure itself to go through.
How Chapter 13 helps
In addition to creating an automatic stay, Chapter 13 bankruptcy can actually help you get caught up on your payments. As noted above, this can be difficult to do when you have other debt. But Chapter 13 can consolidate your debt into a single repayment plan. This will be based on your current income, so that can make everything affordable again and you can use bankruptcy as a tactic to avoid foreclosure.
Not everyone qualifies for Chapter 13, but you can see why it may be very valuable to find out if you do and what legal steps you would need to take.