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Colorado residents: what you can do to save the family home

Despite signs that the economy continues to recover, many Colorado residents continue to face tough financial times. This is particularly true for senior citizens, single parents and those on disability. No matter what someone's personal situation is, however, when it becomes difficult to make a monthly mortgage payment, residents may need to think of how they can stop foreclosure.

One way to prevent and manage foreclosure may be to file for bankruptcy and create a bankruptcy plan. To be sure, bankruptcy does not prevent foreclosure. However, filing for bankruptcy will delay foreclosure by imposing an automatic stay on the lender's foreclosure process.

After this happens, the lender may be able to petition the court for a relief from stay, meaning they can recommence the foreclosure process. A court would then have to decide whether to lift the stay for the house, or whether to keep it in place.

Adding a wrinkle to this process is the multiple state laws that vary on the specific foreclosure process a lender must follow. In any event, bankruptcy is an attractive option for many debtors, because they can essentially live free in their home during the stay. During this time, debtors can use the money they save and apply it to outstanding mortgage payments or other debt.

Of course, the debtor eventually will need to become current on mortgage payments to keep the house. Filing for bankruptcy may help with this process, however. Moreover, in some states, a bankruptcy filing would eliminate a person's liability for any remaining mortgage balance after a foreclosure. In this circumstance, debtors may be able to keep the money and use it toward a modified mortgage payment.

Source: Fox Business, "Will bankruptcy save my home from foreclosure?," Justin Harelik, Jan. 15, 2013

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