What if the borrower files bankruptcy?
Typically, a bankruptcy will temporarily stall the foreclosure process. In some cases, a bankruptcy judge will be able to structure a payment plan by which the borrower will pay you and you are assured that your investment interest is adequately protected. As opposed to unsecured credit card debt, the nature of mortgage debt is that it is secured by real estate. Therefore, if the payment plan is inadequate or your investment interest is not adequately protected, your attorney will likely succeed in having the bankruptcy judge grant a motion for relief from automatic stay. This allows the foreclosure to continue in state court. In either scenario, ultimately, a bankruptcy will not prevent you from beneficial access to your asset.
