Financial struggles can easily leave people in Andover facing mountains of debt. The trouble is that the actions creditors often take in trying to recoup debt can driver debtors deeper and deeper into the hole. In some cases, personal bankruptcy may be the best solution one has to stop collection efforts and re-establish themselves financially. Yet what toll can that exact on their assets (or more specifically, the most valuable asset most have: their homes)? 

Many people seeking bankruptcy protection immediately look to file under Chapter 7 (indeed, according to information shared by the American Bankruptcy Institute, more than 62% percent of all non-business bankruptcy filings in the U.S. in 2019 were under this Chapter). The reason for Chapter 7’s popularity is due to the option it offers to have debts discharged. Yet if one is trying to stop a foreclosure on their home, a Chapter 7 bankruptcy may not be the best option. 

While all bankruptcy cases invoke an automatic stay (which halts all collection activities), Chapter 7 does not provide a mechanism to undue missed mortgage payments. This allows a lender to simply enforce the lien on the home once the bankruptcy has been discharged. Per Credit Karma, those looking to stop foreclosure should instead look to a Chapter 13 bankruptcy. Under Chapter 13, filers create a debt repayment plan that allows them to settle their liabilities over a period of 3-5 years. Mortgage arrears can be included in that repayment plan, thus allowing the debtor to catch up. 

It is important to remember, however, that the obligation to continue to make one’s mortgage payments remains even while they are in Chapter 13. If they fall behind again, the lender can foreclose based on the new arrears.