14 Options to prevent foreclosure
Bankruptcy Chapter 7
Eliminates unsecured debt like credit cards and medical bills, and may delay foreclosure temporarily.
Discharge Debt and Delay Foreclosure When You’re Ready to Let Go of the Home
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a legal process that allows individuals to eliminate (discharge) most unsecured debts, such as credit cards, medical bills, and personal loans. While it doesn’t eliminate your mortgage, it can temporarily pause foreclosure and give you time to make a plan.
In most cases, Chapter 7 is used when the homeowner cannot afford to keep the property and needs a fresh financial start.
Who Should Consider Chapter 7?
Chapter 7 is ideal for homeowners who:
- Can no longer afford their home and want to exit without foreclosure
- Are overwhelmed with unsecured debt
- Want to delay foreclosure to buy time for relocation or other arrangements
- Don’t qualify for Chapter 13 due to lack of steady income
How It Works: Step-by-Step
- Hire a bankruptcy attorney to file your Chapter 7 petition.
- Upon filing, an automatic stay is issued—this legally halts foreclosure, collections, and lawsuits.
- A trustee is assigned to review your debts and assets.
- After about 90–120 days, the bankruptcy is discharged.
- If you’re surrendering the home, you’ll work with the bank to vacate or transition out.
Benefits of Chapter 7
- Eliminates unsecured debt (credit cards, medical bills, personal loans)
- Stops foreclosure immediately upon filing
- Buys time to make a plan (typically 2–4 months of legal protection)
- Prevents creditor harassment and wage garnishments
- Offers a clean financial slate
Considerations & Risks
- Does not include a plan to save the home—you will likely still lose the property unless other options are arranged
- Bankruptcy stays on your credit report for up to 10 years
- Must qualify based on a means test (income and debt levels)
- Not all debts are discharged (e.g., student loans, taxes, child support)
What You’ll Need to Apply
- List of all your debts and assets
- Income documentation
- Last 2 years of tax returns
- Bank statements
- Credit counseling certificate (mandatory pre-filing step)
Timeline
- Initial consultation and prep: 1–2 weeks
- Filing and automatic stay: Immediate
- Discharge: Typically 90–120 days after filing
Real Example
James was $50,000 in credit card debt and 5 months behind on his mortgage. He filed Chapter 7 with the help of a bankruptcy attorney. Foreclosure was paused for 3 months, during which he saved up, moved into a rental, and discharged all unsecured debt.
Frequently Asked Questions
Q: Will this stop my foreclosure?
🅰️ Yes—immediately. However, it only delays it unless you make arrangements with the lender or vacate voluntarily.
Q: Can I keep my home in Chapter 7?
🅰️ Only if you’re current or able to catch up fast. Chapter 7 does not offer a repayment plan like Chapter 13.
Q: How much does Chapter 7 cost?
🅰️ Attorney fees vary but usually range from $1,200–$2,000. Some offer payment plans or hardship discounts.