If homeowners file for bankruptcy, they may be able to stay in their property and avoid foreclosure depending on the type of bankruptcy they file and the specific circumstances of their case.
Chapter 13 bankruptcy allows homeowners to keep their property and pay off their debts over a period of three to five years. Under this type of bankruptcy, homeowners can propose a plan to the court that would allow them to catch up on missed mortgage payments and retain ownership of their property.
Chapter 7 bankruptcy, on the other hand, is a liquidation bankruptcy. This type of bankruptcy will not help homeowners keep their property if they are behind on their mortgage payments and they do not have the means to catch up. However, some homeowners may be able to keep their home if they can prove that their income is sufficient to continue making mortgage payments and other necessary expenses.
It is important to note that a bankruptcy filing will stay on a credit report for up to 10 years, which can make it difficult for homeowners to obtain credit in the future.
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