Consequently, before you file for bankruptcy, you should first understand the possible risks and benefits that may arise and how the process can affect your mortgage lending. The following are some of the ways on how bankruptcy affects mortgage lending:
Considering your mortgage before you file for bankruptcy
I. Bankruptcy can help prevent foreclosure.
Debts can delay the payments of mortgage lendings, and this can prompt the lenders to commence proceedings of foreclosure. In this case of mortgage lending, the lender is allowed to seize the debtor’s property to repay the debt.
However, pronouncing bankruptcy can stop the foreclosure because the court can impose an automatic halt on all creditors.
II. Bankruptcy can lead to legal action by the mortgage lending entities.
Pronouncing bankruptcy forces the lender of the particular mortgage to stop any legal actions against the debtor. Subsequently, the lenders have to wait for the court to evaluate the condition and make a decision. This prevents the creditors from initiating legal actions during bankruptcy.
III. Bankruptcy allows one to reaffirm the debt of mortgage.
The court may grant the option to reaffirm mortgage debt and agree not to include the mortgage in the proceedings of bankruptcy. By reaffirmation, one reaches an agreement with the mortgage lending facility to continue making payments on the home loan.