How Can Chapter 7 Bankruptcy Help You Avoid Foreclosure?

When you are struggling with overwhelming debt, it can be an extra worry to receive notices of foreclosure on your property. If you are unable to pay off the creditors who are threatening foreclosure, it is to be advised to consult with a chapter 7 attorney to find out if chapter 7 can help you avoid foreclosure. Chapter 7 is the bankruptcy chapter that allows you to eliminate debt if you are proven to have insufficient income to support a repayment plan to pay back your creditors.  

Creditors are permitted by law to foreclose on property if you do not pay your debt, and in order to avoid foreclosure you will either have to repay them or file chapter 7 or chapter 13. Filing liquidation bankruptcy can be very effective when you want to avoid foreclosure, because from the moment your chapter 7 petition is accepted by the court, the so-called automatic stay goes into effect.  

The automatic stay in liquidation bankruptcy prohibits any creditor from engaging in or pursuing any collection activities against you while your chapter 7 bankruptcy is being filed, which effectively helps you avoid foreclosure.  During the course of your liquidation bankruptcy procedure, there can be a number of reasons why chapter 7 might help you avoid foreclosure.  

The federal laws that govern liquidation bankruptcy define which of your assets are exempt from a chapter 7 bankruptcy; in addition, each state has its own legislation that determines chapter 7 exemptions. These liquidation bankruptcy exemptions can extend to assets such as your home, so in the case that your creditors are trying to foreclose on your home, the exemption laws automatically let you avoid foreclosure.  

Moreover, if the creditors threatening foreclosure are violating your consumer rights, that fact will become clear during your chapter 7 filing and you can take legal action against you, which again will help you avoid foreclosure. For everybody considering chapter 7, it is essential to realize that chapter 7 is a complicated matter and should not automatically be considered to avoid foreclosure.  

There may be alternatives to filing chapter 7 that can help you avoid foreclosure, such as debt consolidation. When you need to avoid foreclosure, you should always consult with a qualified and reputable debt relief advisor, as well as an attorney, to see what your rights and options are and whether liquidation bankruptcy is really the only viable option left.