Foreclosures and Bankruptcy
Failure to pay your mortgage payments on time can make your home vulnerable to being foreclosed on. Foreclosure is primarily the means by which a mortgage holder, usually the bank, starts the process to take control of the real estate for which he has given you the loan.
Most consumers don’t purchase their homes outright. Instead, they will go to a bank or other mortgage lender and ask for a loan in which to buy the house. The home or building is used as collateral in the event that the buyer, for some reason, rails to live up to his end of the bargain by repaying the loan. At the end of the foreclosure process, the lender takes control of the property and will try to sell it to recoup the money he originally loaned to the homeowner.
The rules for foreclosure are different for each state. In some states, foreclosure takes place in the courts, in other areas it takes lace outside of the courts. The states also have various rules for notification periods stating how long a homeowner must be given before they are forced to leave the property. The laws are so diverse that in some states it is as little as 2 months, while in others, the homeowner has up to two years.
In some states, the process begins with what is called a pre-foreclosure. When a person misses a number of mortgage payments, the lender sends out one or more notices informing him that his payments are late. If the borrower cannot pay, the lender will then probably demand the remainder of the mortgage payments from the homeowner. If he cannot pay, foreclosure proceedings will be initiated.
Filing for bankruptcy is one way to stop foreclosure. The moment you file for bankruptcy, any foreclosure proceedings are temporarily halted. Once the judge makes a ruling, however, on whether the foreclosure can proceed, the mortgage holder can go ahead with the foreclosure proceedings. In other words, bankruptcy does not stop the foreclosure proceedings permanently. At most, it is a way of delaying the foreclosure proceedings to give the homeowner enough time to come up with the money to bring his back payments up to date.
If the homeowner does come into some money through a loan from family, friends, or some other source, there is a normally redemption period in which the homeowner can buy the property back. This would be the best possible outcome for all concerned. The homeowner gets to keep his home, he also gets his payments up to date, and the lender doesn’t have to go into the real estate business.
