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Can You Stop A Foreclosure With Bankruptcy?

11 October 2022 by Richard Ramirez

The potential loss of a home compels some people to consider drastic solutions. When people are unable to pay their bills, however, there is a good chance that the mortgage payment is not the only problem. Bankruptcy can be a possible solution for those about to face foreclosure actions. Read on to find out how this solution works.

The Automatic Stay

Bankruptcy provides filers with immediate relief from not only foreclosure but other losses of property. The automatic stay is a court order that comes along with the filing of bankruptcy. This stay tells all creditors to stop their actions immediately. That means bankruptcy filers can find the below actions are halted:

• Foreclosures of real estate
• Repossessions of vehicles
• Wage garnishments
• Court proceedings brought by creditors
• Bill collection actions of all kinds.

The way things go after you file, however, depends on the type of bankruptcy you file. You will likely choose between chapter 7 or chapter 13.

Foreclosure and Chapter 7

This type of bankruptcy is known as a liquidation action. The bankruptcy trustee has the power to seize property on behalf of creditors. However, a homestead exemption can help protect a homeowner's property from being taken. In some states, the primary residence of a filer is entirely protected.

However, if you are behind on your mortgage, the lender will be able to begin foreclosure actions after a few months. The stay is only temporary. If you owe your lender, make an effort to get caught up during the stay period to avoid losing your home.

Foreclosure and Chapter 13

This form of bankruptcy allows filers to make payment arrangements to get their debts under control. Filers can include their mortgage in the debt repayment plan along with other debts. You must be bringing in income to file for chapter 13, however, since it requires you to make payments. The payments are usually reduced and free of interest, penalties, late payment charges, and other additions to the balance.

While you are under chapter 13 protection, you cannot be foreclosed on. However, debtors must make the payments according to the plan or the bankruptcy agreement could be violated.

Speak to a bankruptcy lawyer about your mortgage debt and foreclosure actions that might be pending. You don't have any time to waste, or you could lose your home and that action cannot be undone. Ask your lawyer about an emergency filing for fast relief from court actions like foreclosure. Save your home and get your financial situation back on track with a bankruptcy filing.

For more information, talk to a bankruptcy lawyer.

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