As time passes and the Great Recession is further in the rear view mirror, home values are increasing and the economy is slowly showing positive signs. But for the average person, that may offer little consolation when a foreclosure notice is posted on their door.

Foreclosure rates in California and Sacramento may be lower than the national average, but there are still thousands of people at risk of losing their homes. Foreclosure usually is initiated when a homeowner misses mortgage payments. Then the lender may begin the process of auctioning off the property to satisfy the loan. This process can take some time, but that doesn’t make it any easier to stomach for the homeowner.

Fortunately, bankruptcy can help in many cases. If foreclosure is inevitable, then Chapter 7 provides a little bit of extra time before foreclosure to allow the homeowner to find other living arrangements or figure out a way to get a loan modification, or perhaps a short sale or deed in lieu of foreclosure. Other times, the home can be saved by filing for Chapter 13 bankruptcy.

The Chapter 13 option lets the homeowner pay off the “arrearage” or late payments over many months in addition to paying the ongoing mortgage payments. In order to do this, the homeowner must have enough income to make these payments. A Chapter 13 bankruptcy plan can also provide relief if the homeowner has a 2nd or 3rd mortgage. If the first mortgage is secured by the entire value of the home, a bankruptcy attorney may be able to get the court to “strip” the 2nd mortgage and make the debt “unsecured.” This means that, depending on the Chapter 13 plan, the homeowner may not have to pay any of the 2nd mortgage at all. The Chapter 13 option requires a commitment, but it can be a lifesaver to allow a homeowner to keep their home and get rid of bothersome unsecured debt.

Another aspect of bankruptcy that is important to foreclosure issues is the automatic stay. The automatic stay makes it so creditors are not allowed to continue or commence any collection activities, which includes foreclosure. A simple Chapter 7 bankruptcy lasts about three to four months. So, a Chapter 7 can easily postpone a foreclosure by that much time. However, a mortgage lender has the option to request that the court “lift” the automatic stay. If the lender is successful, the stay no longer stops the foreclosure. But even in that situation, the homeowner could probably buy two months of extra time in the home.  A chapter 7 is appropriate in this scenario as long as the debtor has additional debts that need to be discharged.

The bottom line is that if foreclosure is imminent or on the horizon, it is probably a very good time to consult with a bankruptcy attorney. Delaying the foreclosure or avoiding the foreclosure altogether are certainly possibilities, but it doesn’t happen with the simple filing of a form. A bankruptcy is a complicated process and requires knowledgeable legal counsel in order to be successful.