Mississippi has not been isolated from the economic turmoil that many other states have experienced in recent years. Many people have lost their jobs or become chronically ill and unable to work. Those who have been informed that their lenders are threatening foreclosure will be glad to know that there may be options available to avoid it, such as filing for bankruptcy.
Two types of bankruptcy are best suited to stopping the foreclosure process. This process often takes place when a homeowner who has an outstanding mortgage loan is unable to make payments. This is known as “defaulting” on a loan, in which case, the lender can take possession of the home. Both Chapter 7 and Chapter 13 bankruptcy can halt the foreclosure process.
How can bankruptcy stop foreclosure?
When an individual or married couple files for bankruptcy under Chapter 7 or Chapter 13, it creates an automatic stay against debt collection attempts, compensatory judgments (such as in a personal injury claim) and foreclosure. Creditors must stop contacting the individual to attempt to collect a debt. No one can sue the person (or couple) for damages. Lenders must not move forward with plans to foreclose on a mortgage.
Some Mississippi residents have been hesitant to file for bankruptcy because they believe it will ruin their credit or because they associate the program with financial failure. In fact, many people use bankruptcy as a valuable financial tool to relieve debt and restore solvency. The record of the petition does not stay on a person’s credit report forever. An experienced bankruptcy attorney can provide guidance and support throughout the filing process.
