The Impact of Bankruptcy on Foreclosure and Repossession Proceedings

The Impact of Bankruptcy on Foreclosure and Repossession Proceedings

Foreclosure and repossession are daunting situations to be in. No one wants their homes, vehicles, or other properties taken from them. Bankruptcy may offer a way out of this. Discovering how bankruptcy can impact foreclosure and repossession may help you take back control of your financial situation. Reach out to a Tullahoma bankruptcy attorney to start taking action today.

How An Automatic Stay Impacts Foreclosure and Repossession

An automatic stay is a legal action that goes into effect when someone files for bankruptcy. One of the main points of filing for bankruptcy is to escape the consequences of falling behind on debt. Part of this escape comes from the automatic stay, which protects people from:

  • Debt collection

  • Creditor harassment

  • Repossession of certain property

  • Foreclosure of certain property

  • Selling your property

When it comes to the relationship between bankruptcy and foreclosure, an automatic stay may provide relief but may not always eradicate foreclosures forever. For example, foreclosure can be stalled by an automatic stay during the bankruptcy case but once the case closes, foreclosure may return. This is more common when missed house payments cannot be made.

Bankruptcy may also fail to stop foreclosure when the foreclosure sale was conducted before you filed for bankruptcy. This point in time might be too late to stop foreclosure since the foreclosure already happened. Whether repossession can still occur after the bankruptcy case is concluded depends on the existence of a reaffirmation agreement and whether payments can be made for the property after bankruptcy.

Using a Reaffirmation Agreement as a Backup Plan

A reaffirmation agreement can be used as a backup plan when your property is still at risk of being repossessed after bankruptcy. What a reaffirmation agreement does is establish a new payment plan for property after bankruptcy to prevent that property from being repossessed. Reaffirmation agreements must be submitted by a certain time and can be canceled under certain circumstances.

The way this works is you sign a reaffirmation agreement with the court and the bank. Approval depends on whether the new payment plan is too much of a financial burden on yourself and your immediate family. A court must help determine whether the agreement is in your best interest. This involves going through various steps and eligibility criteria.

However, even if the reaffirmation agreement is approved, financial problems can return if the plan is not followed. Not making a payment to this plan, for example, can result in negative financial consequences like:

  • Debt is not discharged

  • Creditors repossess property

  • Creditors take legal action

  • Creditors make collection efforts

Avoid these negative financial results by making sure you can hold up this agreement. Consulting with an experienced bankruptcy lawyer may also help you navigate this process and legal options.

Call Tom Bible Law for Legal Aid

Debt can feel impossible to escape from. You can call us today at Tom Bible Law by dialing (423) 424-3116 for a consultation about your options for bankruptcy. Our dedicated team of Tennessee bankruptcy lawyers is ready to explore all your bankruptcy options for escaping foreclosure and repossession. We serve clients throughout the Tennessee cities of Chattanooga and Tullahoma.

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