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Foreclosure of property

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Updated: 4/13/2007 6:35 pm
When you miss or fall behind on making payments on a home mortgage or other valuable property, the bank has the right to proceed with foreclosure. Foreclosure simply means that the bank sells the property and uses the proceeds to repay your loan. When this happens, you must move out of your home or give up your property. Generally, filing bankruptcy will prevent, or at least suspend, a foreclosure from happening. The reason being is that bankruptcy triggers the automatic stay which stops all creditors from taking any action to collect their debts, including foreclosure. The stay lasts as long as the property isn’t declared exempt or until your bankruptcy case is closed. A lender, however, is entitled to apply to the court for relief from the automatic stay and continue foreclosure proceedings if there’s a danger that the property will lose value during the bankruptcy. Usually, to keep property that’s in foreclosure, you’ll need to work out a deal with the lender. A Chapter 13 reorganization bankruptcy is generally the best way to renegotiate a payment plan with the lender. A Chapter 7 filing, on the other hand, will only provide temporary relief from foreclosure. Most likely, if you’re behind on your payments, the trustee will allow the foreclosure on your property to proceed in a Chapter 7 case.
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