When creditors and collectors keep calling, it’s normal to feel overwhelmed. But when those creditors are threatening to foreclose on your home, filing for bankruptcy may be your best option. Working with a South Carolina bankruptcy attorney and filing for the right type of bankruptcy for your situation can wipe out many of your debts and leave you with a clean slate. But that’s not all. It can also help you avoid foreclosure in some instances. Let’s look at what happens when you file and how bankruptcy might just keep you from going through the foreclosure process.
The Court Will Issue an Automatic Stay Immediately
When you file for bankruptcy, the court will issue an automatic stay. This stay prevents creditors from reaching out to you for repayment or threatening you with lawsuits for failing to pay your bills. Your mortgage lender is not exempt from this stay and must comply with the bankruptcy court’s orders. The stay lasts until the bankruptcy court closes the case. Typically, this will last between three and five months.
During the period of the stay, your lender won’t be able to demand repayment. That’s good news for you, even if it’s frustrating to your lender.
Chapter 7 Filing and the Homestead Exemption
The automatic stay keeps your lender from contacting you for payments, but filing for Chapter 7 bankruptcy could keep them from foreclosing on your home even after your bankruptcy is settled.
Under South Carolina’s homestead exemption, the law protects a set amount of equity in your home from seizure. Though the bankruptcy trustee may sell your home to settle your debts, you’ll still be entitled to the equity you have in your home under the homestead exemption. That money can be used to buy a new home, pay for a rental, or other similar purchases.
If your home was foreclosed on, you’d be out the equity you built in your home. And while you may still have to give up your house, you’ll at least have some money to use to find a new place to live.
Chapter 13 Filing Could Help You Catch Up on Payments
If you file for Chapter 13 bankruptcy, your debts aren’t wiped away. Instead, you’re given the chance to catch up on your payments and get current on your mortgage. This helps you avoid foreclosure while still giving you a chance to stay in your house as long as you make the required debt repayments to your creditors and lenders.
Keep in mind that you will be expected to make those payments in full. If you can’t afford them, you may not be able to stay in your home. Your lender could pursue foreclosure, which could force you to miss out on the equity you’ve built up. Keep in mind that you may be able to refinance your mortgage to a lower rate. But this could be more difficult after filing for bankruptcy.
Be Candid With Your South Carolina Bankruptcy Attorney
Ultimately, the best thing you can do is discuss your concerns with your bankruptcy attorney as soon as you’re considering filing. They’ll be able to review your case, your finances, and the details of your home loan to help you figure out the best option for your situation and your goals.
Let Lam Law Firm Help
Filing for bankruptcy could help you avoid foreclosure, but every case is unique. That’s why it’s important to speak with an experienced South Carolina bankruptcy attorney before you file. At Lam Law Firm, our team is here to help take the stress out of filing for bankruptcy. Contact us today to schedule a consultation.
