Most people know that bankruptcy can be a great tool for getting out of debt. What many don't know is that bankruptcy also offers protection against some legal actions against you. When a person files for bankruptcy, any debt collection efforts must cease until the case is resolved. Bankruptcy also extends to the foreclosure process. Even if you are in the final stages of foreclosure, bankruptcy can stall, and in some cases, prevent foreclosure.<br><br>According to a recent study by the University of North Caronlina's Center for Community Capital, borrowers who filed for bankruptcy after being foreclosed on were 70% more likely to keep their homes than borrowers that didn't file for bankruptcy.<br><br><strong>Chapter 7 vs Chapter 13 bankruptcies</strong><br>According to the same study, Chapter 13 bankruptcies were especially effective when it came to preventing foreclosure. In fact, Chapter 13 bankruptcies were five times more effective than Chapter 7 bankruptcies. According to the study's author, a probable reason for this is that a Chapter 13 bankruptcy restructures a person's debts and makes repayment possible while a Chapter 7 simply discharges debts. However, Chapter 7 bankruptcies still proved effective at stalling and sometimes preventing foreclosure. By discharging unsecured debts such as credit card debt, borrowers' funds are freed up so they can be put towards catching up on the mortgage payment.<br><br><strong>Stalling for time</strong><br>Of course bankruptcy doesn't always insure that a borrower will get to keep his/her home. Bankruptcy doesn't stop the foreclosure process but rather forestalls it. Unless a borrower can get a loan modification or secure more income, a bankruptcy can only postpone the inevitable. What makes bankruptcy such an effective tool in preventing foreclosure is that it allows borrowers to stall for much-needed time.<br><br><strong>Few will actually use bankruptcy during foreclosure</strong><br>According to the same study, very few, just 8%, filed for bankruptcy after being foreclosed on suggesting that bankruptcy is a very underutilized tool. A likely explanation for this is that a negative social stigma surrounds bankruptcy and deters many from filing. Borrowers that are facing foreclosure would be wise to at least consult a bankruptcy attorney to explore that option. Most bankruptcy attorneys will offer a free consultation in which they determine whether you qualify for bankruptcy and whether it can be a viable option for your circumstances.<br><br>Business, real estate, and bankruptcy law and litigation news brought to you by mbblegal.net<br>Source: mortgageloan.com/study-bankruptcy-big-help-saving-home-foreclosure-9720