No one wants to receive a foreclosure notice from their mortgage company. It's upsetting. Fortunately, there are several ways that you can save your home after you've received a foreclosure notice. You could ask your mortgage company to modify your mortgage or pay the past due amount. However, many people consider filing bankruptcy when they are faced with foreclosure. The good news is, filing bankruptcy could actually save your home, but there are other things that you need to take into consideration before you contact a bankruptcy attorney.

Order of Relief

When you file bankruptcy through the court, an Order of Relief is automatically issued. It lets your creditors know that you are filing bankruptcy and they need to cease all attempts to collect money. This goes out to all of your creditors, including your mortgage company. The Order of Relief will stop the progression of your foreclosure until your bankruptcy is complete.

Once the Order of Relief is issued, your mortgage company cannot proceed with the foreclosure -- even if your home is already on the foreclosure sale schedule. However, your mortgage company can file a motion to lift the order. If the motion is granted, your mortgage company does have the right to proceed with the foreclosure and sell your house.

Should You File Chapter 7 or 13?

Filing Chapter 7 bankruptcy relieves you of your dichargeable debts completely -- including your mortgage. When you signed your mortgage papers, you agreed that you house would be used as collateral for the loan. Therefore, if you if Chapter 7 bankruptcy, there's a possibility that you could lose your home. However, your bankruptcy trustee is supposed to liquidate any non-exempt property that you own and use the funds to pay your unsecured debts. Because your mortgage is a secured debt, and bankruptcy doesn't dissolve the lien. The mortgage would have to be paid off with the money from the sale of your home before the bankruptcy trustee could pay unsecured debt. Therefore, bankruptcy trustees only sell houses that have equity in them -- and even if you have equity in your house, there's a good chance that a portion of the equity is exempt from bankruptcy according to your state bankruptcy laws. Once your bankruptcy is discharged, the bank still has the right to continue with the foreclosure if they want, so during and after your bankruptcy, it's extremely important to pay your mortgage on time if you want to keep your home later.

When you file Chapter 13 bankruptcy, you set up a payment plan to pay off all of your past due bills -- including the past due portion of your mortgage. All of your past due payments are combined into one monthly payment. You're required to make your monthly bankruptcy payments according to the terms in your bankruptcy agreement. Keep in mind, this is an additional payment to repay past due debts, so before filing Chapter 13 bankruptcy, you need to make sure you can afford both your regular mortgage payment and your bankruptcy payment if you're trying to keep your home.

For more information, contact Morrison & Murff or a similar firm.