Can Bankruptcy Stop Foreclosure?

Filing for bankruptcy protection and including your mortgage as part of the bankruptcy petition will temporarily stop any foreclosure proceedings. When you file for bankruptcy, the automatic stay will be in effect which will prohibit any creditors from pursuing collection activities. The length of the stay is limited and what happens thereafter depends on whether you file for Chapter 7 or Chapter 13 bankruptcy. Understanding your loan modification options before you choose bankruptcy is critical because when you choose bankruptcy you are still obligated to bring your mortgage current if you intend on saving your home. That’s why Loan Modification may be a better option for you.

What is Loan Modification?

Loan modification is the process whereby a homeowner's mortgage is modified and both lender and homeowner are bound by the new terms

.

The most common modifications are lowering the interest rate, reducing the principal balance, 'fixing' adjustable interest rates, increasing the loan term, forgiveness of payment defaults & fees

, or any combination of these. The result though, is a lower mortgage payment for you.

Can I Negotiate a Loan Modification On My Own?

Of course. However, negotiating and closing a loan modification is like representing yourself in court: it is possible, but you must decide if you are willing to take the time and assume the risks on what is likely to be your most valuable asset. A Loan Modification can be a complicated procedure and you are only allowed to modify your loan under President Obama’s plan one time. So it’s crucial that you get it right the first time. Many times homeowners turn to Foreclosure-Shield.com because they have reached a dead end when attempting to negotiate a loan modification on their own. For a real life example of the frustration that can result from the Do-It-Yourself Loan Modification, please see this ABC News Investigation on Loan Modification.