Bankruptcy is not a legal remedy that many Tennessee residents are excited to pursue. It can impose burdens on a person’s ability to access credit and loans for many years after the proceedings are over. It can take a long time to complete and can force a filer to part with items of property that they may not want to lose. However, it offers some advantages to people who are faced with a different but equally as terrifying legal process: foreclosure.
If a foreclosure goes through from beginning to end, a family may find itself without a home. Foreclosure is effectively the repossession of a home by the bank or lending institution that secures the homeowner’s mortgage. Chapter 7 bankruptcy can help a person facing foreclosure in several ways.
First and like other forms of bankruptcy, Chapter 7 bankruptcy puts an automatic stay on loans that are in default. This stay includes mortgages. If a lending institution has not begun foreclosure proceedings against a party with its mortgage in default, the stay may hold off the foreclosure and fix the loan deficiencies through bankruptcy.
Second, under Chapter 7 bankruptcy a debtor eradicates all of his debts, including his mortgage. Though he has to liquidate some of his property in the process, he may be able to erase his mortgage debt through the process. He may also wipe out some tax-related debt connected to his mortgage through the filing as well.
There are other ways that Chapter 7 bankruptcy may help a debtor save his home from foreclosure. However, filing for Chapter 7 or any other form of bankruptcy does not guarantee that a debtor will be able to stop foreclosure. Individuals interested in learning more about bankruptcy as a way to avoid foreclosure may choose to speak with bankruptcy professionals in the legal field about their options.