When you file bankruptcy it indicates that you have exhausted all other options of debt relief and declaring yourself bankruptcy is the only option that you are left with. Filing for bankruptcy will not pardon your debts. It is only that you are given enough “room” to space out your debt repayments so that it becomes more manageable and systematic.
You can save your house from foreclosure if you file bankruptcy. However, there are a couple of factors that are needed to be taken into consideration. And it also depends on the type of bankruptcy you are filing. In Chapter 7 bankruptcy, which is also known as “liquidation” plan, your non-exempt assets are liquidated or sold so that your creditors can be paid off.
On the other hand, in Chapter 13 bankruptcy, you don’t have to convert your assets into cash by selling off your assets. Instead you are allowed to make payments for debts as per a new repayment plan. You are expected to repay your debts within 3 to 5 years. In case, foreclosure proceedings have also been initiated against you, you can save your house from foreclosure provided the date of filing for bankruptcy is much before the date of foreclosure sale.
With the new bankruptcy laws that came into effect on 17th October 2005, filling bankruptcy has become very difficult. The fed has laid down certain norms related to bankruptcy. You are required to attend a credit counseling session and the session has to last for least 180 days. So, you may not be able to file bankruptcy when you think of. A credit counseling session can help you in many ways. However, if the foreclosure sale date is within these 180 days, you will be very left with very little time to file bankruptcy and stop the foreclosure process.
Once the foreclosure proceedings have been initiated, you are in a position to avail a very limited number of options. So, you either pay off debts in full and if you are unable to do so, you file Chapter 13 bankruptcy so that you can stop the foreclosure for a while. One important aspect that should be understood is even if you file Chapter 13 bankruptcy and there is foreclosure sale looming large, you may not be able to save your home. You can only defer it for sometime.