Part 4

The timing of when to file for bankruptcy in relation to foreclosure depends on your specific circumstances. Filing for bankruptcy before foreclosure can temporarily halt the foreclosure process due to the automatic stay. This relief might provide you with the opportunity to negotiate a loan modification or come up with a plan to get caught up on mortgage payments, especially in a Chapter 13 bankruptcy.

Filing for bankruptcy after foreclosure, especially a Chapter 7, may eliminate any deficiency balance that arises if your home’s sale doesn’t cover your mortgage debt. In some states, lenders can sue homeowners to recover this deficiency. Bankruptcy can potentially discharge this debt, freeing you from this liability.