Does Filing Bankruptcy Stop the Foreclosure Process?

You are behind on your mortgage payments. Your lender is threatening foreclosure. You may be concerned about losing your home, but you do not have the money right now to get your payment status current. Is there anything you can do to stop the foreclosure process?

You may want to consider filing for bankruptcy. Filing for bankruptcy can temporarily stop the foreclosure process. However, the specific impact depends on the type of bankruptcy you file and your financial situation.

When you file for bankruptcy, an automatic stay goes into effect. This is a legal order that halts most collection activities, including foreclosure. What happens next depends on whether you file for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is best for wiping out debts. You will still get an automatic stay, and it will temporarily stop foreclosure proceedings, but it is not a long-term solution. Since Chapter 7 bankruptcy is primarily about liquidating assets to pay creditors, it typically does not help you catch up on missed mortgage payments.

If you are unable to catch up on your mortgage, the lender may request the court lift the stay to proceed with foreclosure.

Chapter 13 Bankruptcy

Chapter 13 is a better option if you truly want to fight foreclosure and keep your home. It offers a lot more protection. Filing and completing a Chapter 13 repayment plan is the only sure way to stop your foreclosure permanently. Chapter 13 bankruptcy allows you to reorganize your debts and create a repayment plan.

If you are behind on your mortgage payments, Chapter 13 lets you include the debt in the plan, enabling you to catch up on your payments over the course of three to five years. You can also use Chapter 13 to address other debts.

Plus, while the case is pending, the mortgage company cannot foreclose as long as you are making all your monthly mortgage payments and Chapter 13 plan payments. At this time, you can also continue (or start) any loan modification programs your lender may offer. So as long as you keep up with the repayment plan and ongoing mortgage payments, you can avoid foreclosure and keep your home.

When Does the Automatic Stay Begin?

The automatic stay takes effect as soon as you file for bankruptcy, whether you choose Chapter 7 or Chapter 13. The automatic stay buys you some time to deal with the foreclosure. During this time, you can get current on your mortgage or try to renegotiate it. However, keep in mind that if you’re behind on your mortgage when your case is filed, the automatic stay can be lifted if the bank asks the court for relief from the automatic stay.

Contact Us Today

Bankruptcy can be the right choice if you want to stop a foreclosure and keep your home. What exactly will happen depends on your situation and type of bankruptcy.

Bankruptcy can have a lasting impact on your financial situation, but it can help you keep your home. South Florida bankruptcy attorney Brian K. McMahon, P.A. can make the process stress-free. Whether you need to file for a Chapter 7, 11, or 13 case, we’ll walk you through the process from start to finish. Schedule a consultation today by calling (561) 658-1789 or filling out the online form. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.