This blog recently discussed homestead protections during the bankruptcy process in Tennessee. An issue that may be of significant concern for parties facing overwhelming debt and the possible loss of their family home is the relationship between foreclosure and the bankruptcy process which is why it is important to understand.
When a homeowner has fallen behind on mortgage payments they may have many worries and concerns. The lender may begin to pursue the foreclosure process. The foreclosure process involves the creditor taking the home back, selling the home at auction and using the proceeds to repay the mortgage and any associated legal costs.
Once the personal bankruptcy filing has been made, an automatic stay will go into effect which generally protects the filing party from collection actions while the bankruptcy process proceeds which can include a mortgage lender. In some circumstances, this can also help with the foreclosure process, however, may not in certain circumstances if the lender seeking to foreclose on the property files a motion to lift the stay or of the notice of foreclosure has already been filed prior to the stay.
Additionally, the Chapter 13 bankruptcy process may be able to help by including past due payments in the repayment plan to allow the filing party to become current and avoid foreclosure. Other options may also be available to help save a family home but it is important to be familiar with what each is and what is the best option to protect the filing and help them reach their goals for the process.