If eligible, a homeowner might consider filing bankruptcy to save their home from foreclosure. When filing for bankruptcy, homeowners have two basic options. The first is a Chapter Seven Bankruptcy – often referred to as liquidation bankruptcy. In this type of bankruptcy, all non-exempt assets of the homeowner are subject to being liquidated for the benefit of the homeowner’s creditors. The second option is a Chapter Thirteen Bankruptcy, which allows the homeowner(s) to propose a plan to the creditors to make payments over a period of time.
In both bankruptcy situations, if there is a foreclosure against the home and it has not been sold at sheriff’s sale, the bankruptcy filing stops (stops at least temporarily, in most cases 30 days in Chapter seven) the foreclosure. This gives the homeowner some time to get to the bank to agree to a payment plan designed to catch up on the mortgage and eventually re-establish a good creditor-debtor relationship.
There are many people and entities like Cherry Park Properties LLC in the business of purchasing rights of redemption. The homeowner whose residence is in foreclosure may be approached several times to purchase their redemption rights.
Keep in mind that the equity on the property in Kansas is nearly always exempt from being taken to help creditors that do not have lien rights to the home (e.g., credit card debt). This means that even in bankruptcy, the homeowner has redemption rights that can be sold, the proceeds from which cannot be taken by such creditors.