5 Things You Should Know If You’re Facing Bankruptcy and Behind on Your Mortgage -

Life doesn’t always go according to plan.
If you’re going through a personal bankruptcy and are also behind on your mortgage payments, you may feel like you’re standing at the edge of a cliff—unsure which way to turn. The truth is, while your situation may be overwhelming, it is not hopeless. You have options, and the decisions you make now will have a big impact on your financial future.

At We Renovate Homes, we work with Arizona homeowners every day who are in situations just like yours. They’re good people who’ve experienced job loss, medical expenses, divorce, business downturns, or other life changes that made it difficult to keep up with their mortgage. If this sounds familiar, know that you’re not alone—and that there are steps you can take right now to protect yourself and your home.

Below are five things you should know about your situation, and why acting sooner rather than later can make all the difference.

1. Bankruptcy Doesn’t Automatically Stop Foreclosure Forever

One of the biggest misconceptions homeowners have is that filing for bankruptcy will completely and permanently protect their home from foreclosure. While it’s true that bankruptcy triggers what’s called an “automatic stay”—a court order that temporarily halts most collection actions, including foreclosure—this protection has limits.

In Chapter 7 bankruptcy, the stay is temporary and generally only buys you a few months of relief. Your lender can request that the court lift the stay, allowing them to resume foreclosure if payments aren’t brought current.
In Chapter 13 bankruptcy, you can restructure your debts and catch up on missed mortgage payments over time, but you must keep making your regular monthly mortgage payment in addition to your repayment plan.

In other words, bankruptcy can give you breathing room, but it’s not a permanent fix for a mortgage that’s behind. You still need a long-term solution—and the earlier you start exploring that, the more options you’ll have.

2. Communication With Your Lender Is Key

It’s easy to avoid answering calls or opening letters from your mortgage company when you’re behind. But in reality, ignoring them only makes things worse. Most lenders actually prefer to work out a solution that avoids foreclosure because it’s costly and time-consuming for them too.

Here are a few options you might discuss with your lender:

Loan modification – Changing the terms of your mortgage to make payments more affordable.
Forbearance – Temporarily pausing or reducing your payments.
Repayment plan – Spreading out your missed payments over several months.

Even if you’ve filed for bankruptcy, your lender may still be open to these solutions—especially if you show that you’re making a genuine effort to resolve the delinquency.

If you’re nervous about negotiating with your lender directly, a housing counselor approved by HUD can help you understand your rights and guide you through the process.

3. You Still Have Equity Options—Even in Bankruptcy

Many homeowners think that once they’re in bankruptcy, they’ve lost all rights to their home’s equity. That’s not necessarily true. In fact, in certain situations, selling your home before the foreclosure process is complete can allow you to:

Pay off your mortgage in full
Protect your credit from a foreclosure entry
Walk away with cash from the sale

If you have equity, even during bankruptcy, you may be able to sell your home with the court’s permission. This can be especially important if:

You can’t afford the mortgage long-term
You want to avoid the emotional and financial damage of foreclosure
You’re ready to downsize, relocate, or rent for a while

We often work with homeowners in this position to make a fast, as-is purchase—meaning no repairs, showings, or commissions—so they can pay off their mortgage and move forward without the stress of a drawn-out sale.

4. Time Is Not on Your Side

The longer you wait to act, the fewer choices you’ll have. This is true whether you’re in bankruptcy, foreclosure, or both.

Here’s why:

Late fees and penalties add up quickly, increasing what you owe.
Bankruptcy cases have strict timelines and requirements—missing a deadline can limit your protections.
Foreclosure timelines vary, but once your lender starts the process, it moves faster than you think.

If you wait until the last minute, your only remaining options might be:

A short sale (selling for less than you owe with lender approval)
Deed in lieu of foreclosure (giving the home back to the lender)
Losing the home at a foreclosure auction

By acting early—before deadlines loom—you can preserve better outcomes, protect more equity, and reduce stress for yourself and your family.

5. You Don’t Have to Navigate This Alone

Bankruptcy and foreclosure are complicated enough on their own—together, they can feel overwhelming. But you don’t have to figure it out by yourself.

Here are some ways to build your support team:

Bankruptcy attorney – To protect your rights and guide you through court requirements.
HUD-approved housing counselor – To explore mortgage workout options.
Real estate professional experienced in distressed properties – To help you understand your home’s value, your equity position, and whether selling now makes sense.
Cash buyer – If speed is critical, a reputable cash buyer (like us) can give you a written offer and close in as little as 7 days.

We Renovate Homes has worked with many Arizona homeowners in exactly this situation. We understand the legal and financial challenges you’re facing, and we know how to structure solutions that meet court requirements, satisfy your lender, and give you the fresh start you need.

The Bottom Line

Filing for bankruptcy while being behind on your mortgage can feel like an impossible situation—but it doesn’t have to mean losing everything. The key is knowing your rights, acting quickly, and exploring all your options before deadlines take them away.

If you take nothing else from this article, remember these three things:

Bankruptcy is a tool—it’s not a magic eraser.
Open communication with your lender can open doors to better solutions.
You have more options than you think—especially if you act early.