Once you file for bankruptcy you will automatically get an automatic stay that will immeditely take affect to stop your creditors from any and all collection activities, including foreclosure. However, whether you are able to keep your home in the process will depend upon whether you can develop a repayment plan through the bankruptcy case, that can show that you can afford to make the payments necessary to keep the home.
Bankruptcy has many benefits for the bankrupt debtor to help you keep your assets, including your home, but the hard reality of bankruptcy is that it will take some money to go bankrupt. I know how it sounds to hear that you must have money to go bankrupt, but the reality of the matter is that if you want to keep your home, eventually you will have to pay for it. The bankruptcy will allow you immediate breathing room by stopping your creditors in their collection tracks, but it is then up to you to decide how you will get through the bankruptcy process and position yourself for a fresh start, which is possible.
Some bankruptcy attorneys offer free consultations, but the cost will vary. You may be able to find an attorney to take the case on a pro bono basis, which would not coost you a dime. You should contact a volunteer lawyers association in your area, your State bar or a legal clinic. They should be able to lead you to an attorney that can work with you in this crucial time in your life.
Below is some general information regarding bankruptcy that I hope you find helpful.
Bankruptcy refers to the federal law that permits certain entities to obtain permanent relief from many debts and obligations. The intent of the bankruptcy law is to enable debtors to get a "fresh start" in their financial affairs. The bankruptcy law underwent a major revision in 2005. Once a bankruptcy has been concluded, the debtor is discharged from many debts, meaning the debtor is no longer legally obligated to pay those dischargeable debts.
Chapter 13 - often called wage-earner bankruptcy, is used primarily by individual consumers to reorganize their financial affairs under a repayment plan that must be completed within three or five years. To be eligible for Chapter 13 relief, a consumer must have regular income and may not have more than a certain amount of debt, as set forth in the Bankruptcy Code. You can usually keep your property, but you must earn wages or have some other source of regular income and you must agree to pay part of your income to your creditors. The court must approve your repayment plan and your budget. A trustee is appointed and will collect the payments from you, pay your creditors, and make sure you live up to the terms of your repayment plan.
If you can not show that Court that you can afford to keep your home, you will have the option to surrender the home back to the mortgage company and cancel any deficiency balance that will remain if the house is sold for an amount less than the the loan balance. But they will not simply get to take your home. Bankruptcy will allow you to be an active participant in the process and you will work closely with your bankrutpcy attorney to do whatever it takes to save your home or properly surrender your interest in the property. You can also try to sell it, but if you do not think that you will make a profit from the sale, then you should just surrender the home and let the creditor deal with the hassle of selling it.
And yes, bankruptcy stays on your credit for 10 years and you will still be able to work at rebuilding and re-establishing your credit during that time. However, you will have to be diligent in your efforts to rebuild your credit after a bankruptcy, it can be done.
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