Though bankruptcy does not automatically remove mortgages or other liens on your property without payment, claiming bankruptcy to avoid foreclosure can be a valid move particularly if the extra time will allow you to catch up on back payments. However, claiming bankruptcy is the last option we like to recommend to homeowners looking to avoid foreclosure. You may be surprised to discover that there are several more options for most homeowners facing foreclosure or just behind in their mortgage payments.
Bankruptcy cannot fix all mortgage issues though! For example, it is usually not possible to eliminate certain “secured” lines of credit where a mortgage or other lien on the property has been taken as collateral. In a typical bankruptcy process, you may be able to get secured borrowers to accept payments spread out over more time or perhaps eliminate any obligation to pay further money if your house is taken, but you usually can’t keep the collateral unless you keep paying off the lender.
Is Claiming Texas Chapter 7 Bankruptcy Going to Help Me Avoid Foreclosure?
Unfortunately, if you want to keep property like a car or a house and are behind in payments, a chapter 7 bankruptcy may not be a good option for you. In Texas Chapter 7 does not remove the right of car loan holders or mortgage lenders to take back your property in order to pay off the debt.
The general idea of a chapter 7 bankruptcy is to discharge your debts (clean slate) in exchange for your giving up all property except for that which is “exempt” under the law. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors.
Call us to find out more about claiming bankruptcy to avoid foreclosure and we’ll also discuss several better options for which you may also qualify.