There is a lot being written about illegal foreclosures at present and there are widespread calls to stall all foreclosures until each and every one can be examined. That could take years to complete and possibly even bring about another minor economic downturn. In most cases, lenders have borrowed money to loan to home buyers so any halt in processes can be costly. However, people who are subject to a foreclosure are entitled to some protection and if foreclosure is eminent then bankruptcy could be your savior. But is it?

Filing a bankruptcy petition automatically stalls, or in legal terms, stays, all debt collection activities of all creditors. The bankruptcy process then looks at the petitioner’s current financial situation including all income and all expenses. Debts can also be examined to ensure they are legally enforceable. For some mortgagees, the bankruptcy has resulted in significant changes to their mortgage, all to their advantage.

Bankruptcy is a serious issue and you should give careful consideration to the option first. The Truth In Lending Act may offer some protection, especially if your loan is less than three years old. If you have refinanced in the last three years then there is even more protection offered. Consumer protection has been paramount in drawing the Truth In Lending Act and, from a legal perspective, is hard for some lenders to follow to the letter. Any error on the lender’s part when it comes to paperwork can work heavily in your favor – it can even cancel the mortgage.

Rather than jumping straight into the bankruptcy process, talk to an attorney to see if your  mortgage, and the foreclosure process, has been undertaken legally. Those in New York state have been given a big break in this process – they can challenge their mortgage in court, and if successful, have all their legal costs paid for by the lender. In other states you will have to pay your own legal costs. Bankruptcy is an option, but look a little more closer at your mortgage and the foreclosure process – it’s so complex that a single error can be a huge help to you.

Related posts:

  1. Economic Blues, Record Foreclosures and Exploding Bankruptcies
  2. Bankruptcy, Foreclosures and Short Sales
  3. Busting The Myths Behind Foreclosures And Bankruptcy
  4. Foreclosures And Bankruptcy Can Be A Taxing Time